Published Date: 10 August 2008
MORE homeowners in Scotland are facing repossession than other parts of the UK, largely because of greater exposure to sub-prime and high loan-to-value mortgages, an investment firm has warned.
While official Government figures for repossessions in Scotland are not available, property investment company A Quick Sale said it has received 19% more inquiries about "sale and rent back" schemes in Scotland than the rest of the UK in the first quarter of the year.
Such schemes let struggling homeowners sell their property to a company to avoid repossession and then lease it back.
The company analysed the inquiries received from Scotland and found 57% were from homeowners interested in a sale and rent back scheme, compared with 38% in England. As well as handling sale and rent back deals, A Quick Sale handles inquiries about other services, including buying unwanted investment properties from landlords.
Richard Watters, A Quick Sale managing director, said: "It is evident that the average homeowner is finding it increasingly difficult to keep up with their financial commitments, especially those north of the border."
The company believes part of the reason for this is the higher proportion of lower income groups in Scotland.
It said such homeowners are more likely to have experienced problems with their credit ratings and taken out sub-prime mortgages in the past, or had opted for mortgages with a loan-to-value of 100% or more as they could not afford to save for a deposit.
They are now finding it harder to cope with repayments than mainstream borrowers, or to find an affordable deal when their current fixed rate mortgage come to an end.
Repossessions in the UK are now at their highest level since 1999, with the Council of Mortgage Lenders reporting on Friday that they reached 18,900 in the first six months of the year, up from 12,800 for the same period of 2007.
The number of households with mortgages in arrears for three months or more rose by nearly a third to 155,600 in the first half of this year.
And more homeowners are expected to fall into negative equity as house prices drop. Halifax last week said that prices fell for the sixth month in a row in July, when they dropped by 1.7%.
Bryan Jackson, insolvency partner with PKF in Scotland, said: "If you combine the issues around the credit crunch, historic debt and banks not wanting to lend, then there are going to be more repossessions.
"Recently I've come across more sell and rent back companies in the market wanting to capitalise on this."
He said there is potential for a faster rise in repossessions and insolvencies in Scotland because trends tend to lag a year behind England where such problems appear to have peaked already.
He said the "low income, low asset" scheme introduced by the Scottish Government this year will allow more people to declare themselves bankrupt.
The full article contains 501 words and appears in Scotland On Sunday newspaper.