Repossession, repossession, repossession

"Number of people losing homes soars", bleats The Daily Express. "Middle-class homes crisis: 39,000 facing repossession" wails The Daily Mail.

Reality check:

According to Nationwide's series of house prices since 1952, the first full year of the last crash was 1990, when house prices ended the year down 10% (not adjusted for inflation), which is roughly where we are now (in mid-2008), so comparing 1990 and 2008 seems appropriate.

There's a handy graph on page 2 of The Ministry of Justice's figures for 2008Q1 which shows that historically about two-thirds of mortgage possession claims result in a repossession order; and that in the early 1990s, about half of repossession orders resulted in an actual repossession. The number of orders that resulted in a repossession fell significantly once the house price boom was properly underway, down to barely one-eighth, which has since risen to about one-quarter.

Assuming that the ratio of actual repossessions-to-repossession orders in the early 2000s was because people found it easy to remortgage, this is the key variable! 

Given that remortgaging is now much more difficult (lower values x lower LTV and higher interest rates etc), and that mortgage lenders (who are in a bit of a blind panic at the moment) are submitting mortgage claims as a first rather than last resort, I wouldn't be surprised if actual repossessions soared way above the figures for the early 1990s (average over 60,000 for 1990 - 1993), especially as the annualised 2008Q1 number of claims was already higher than the number for 1990, and the annualised number of actual repossessions for first half of 2008 was roughly the same as for 1990.

Chuck in the BTL bubble* and I'd guess anywhere up to half-a-million repossessions in the next three years, but we'll see...

* 183,000 BTL mortgages were taken out in the peak year of 2007, who have presumably little or no equity and no reason to desperately hang on to a depreciating asset.