Predictions 400,000 families could lose their homes as unemployment skyrockets

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Repossessions could exceed the heights reached during the property crash of the early 1990s amid a ‘huge spike’ in defaults, according to respected economics consultancy Fathom.

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Re: Predictions 400,000 families could lose their homes as unemployment skyrockets

Predictions 400,000 families could lose their homes as unemployment skyrockets

By Olinka Koster
Last updated at 11:56 PM on 20th February 2009

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Up to 400,000 families could lose their homes as the recession drives unemployment to unprecedented rates, a leading economist has warned.

Repossessions could exceed the heights reached during the property crash of the early 1990s amid a ‘huge spike’ in defaults, according to respected economics consultancy Fathom.

The crisis will be triggered by a surge in unemployment to four million, or 13 per cent of the workforce, according to Danny Gabay, a former Bank of England economist.

Slump: Estate agent boards piled up in a yard in Hull. Repossessions are soaring as people struggle to pay their mortgages

That would be the worst figure since records began in 1971, exceeding even the jobless totals reached in the mid-1980s under Margaret Thatcher.

The dire predictions came after the Council of Mortgage Lenders reported that 40,000 families were kicked out of their homes last year – a 12-year high.

The number of homes that will be repossessed is expected to almost double this year alone, to 75,000, the CML predicts. That is 200 every day or more than one every 10 minutes. However, Fathom believes the toll will get even worse in the coming four years as soaring jobless rates leaves people unable to service their mortgages.


Gordon Brown, on a visit to his Fife constituency, came under fire following revelations his government's Homeowners Mortgage Support Scheme will not start until April
The City consultancy expects at least 375,000 repossessions over the course of the recession, and that the figure could be even higher.
That compares with 300,000 between 1991 and 1995, when the UK last saw a housing crash.

Mr Gabay said: ‘Considering the decline in the housing market has already exceeded the entire peak-to-trough decline over the course of the 1990s, I think this is quite a conservative estimate.’

When Baroness Thatcher was Prime Minister, the rate of unemployment peaked at 12.1 per cent in 1984, amid a huge wave of industrial closures that included the decimation of coal mining.

However, Mr Gabay said: ‘This recession will be at least as bad as the one in the 1980s, and implications for the labour market could be at least as bad as well.’

Separate figures from the Ministry of Justice yesterday showed that in the three months to December alone, 29,095 mortgage possession court orders were made in England and Wales – 14 per cent higher than a year ago.

A total of 114,296 orders were made in England and Wales last year, the highest figure since 1992. Not all will result in the homes being repossessed, but the figures give an indication of the bleak year ahead – particularly for those who lose their jobs.
The CML also reported a rise in instances of homeowners simply handing back their keys. But director general Michael Coogan said: ‘Borrowers are still liable for their debt, even if they leave the property, so working through their problems is much more likely to be in their best interests.’

As the figures were released, it emerged a scheme to help people stay in their homes will not be available until April.

The Government announced its Homeowners Mortgage Support Scheme, which is designed to help families avoid the horror of repossession, in December.





But it only published final details of the scheme yesterday, and said it would only come into force in April. Yesterday, ministers were criticised for giving homeowners ‘false hope’, when close to 3,000 are being made redundant every day and families are finding it increasingly difficult to make payments.

Those on expensive fixed-rate deals, who have not benefited from recent interest rate cuts, are suffering the most.

Shadow Housing Minister, Grant Shapps, said: ‘The Prime Minister’s approach of headlines and spin over substance has to stop and genuine measures are now urgently required to prevent Labour’s recession for turfing tens of thousands more families out of their homes.’

Under the scheme, people will be allowed to defer the interest on their mortgage for up to two years on loans of £400,000 or less.