REPOSSESSION actions are rising in Scotland, according to a leading law firm, as the credit crunch deepens and borrowers struggle to meet their mortgage repayments.
In England and Wales, repossession court hearings jumped by 16% to 40,442 during t
he first three months of the year, the highest since 1992, the darkest hour of the last property recession. This leap is in line with the prediction from the Council of Mortgage Lenders that around 45,000 families throughout the UK will lose the roof over their heads this year.
It had been hoped that Scotland, which has so far escaped the widespread scenes of tumbling property prices being played out south of the border, would avoid any significant rise in families being turfed out onto the streets.
But Scotland on Sunday can reveal that repossessions are on the climb here too, as the credit crunch pushes up monthly bills. Unfortunately, there are no comparable statistics covering Scotland, because the courts do not produce equivalent data to those in England and Wales. Furthermore, the CML only collects UK-wide data from its members.
However, legal firms acting on behalf of lenders say their instructions are rising, as homeowners' budgets come under pressure. Glasgow and Fife are worst hit, with Edinburgh escaping relatively lightly so far.
Fyfe Ireland partner Drew Taylor said: "We are increasingly seeing cases where people are getting into trouble because they have overstretched themselves. Sometimes when you look at the repayments compared with their income, they are extremely high, and you wonder how on earth they ever got the loan.
"But of course people's circumstances change. They might have had a well-paid job which they lost. Unemployment is also becoming a problem again."
But an even more worrying trend is emerging. Where borrowers have had difficulties but reached an arrangement with the lender to repay over time, these are now defaulting in far larger numbers than usual.
Taylor said: "This is not surprising as the credit crunch has pushed up their repayments when other bills too are rising. Lenders are doing everything they can to help, but the likelihood is more of these will feed through to repossession.
"Another worrying trend is that in our discussions with lenders they tell us that more borrowers are struggling to meet repayments and falling behind. Some of these again will feed through to repossession."
Money Advice Scotland confirms a big surge in numbers coming to them for help with debt problems.
Chief executive Yvonne Gallacher warned: "I believe we are sitting on a time bomb which is ticking away but hasn't actually gone off yet.
"We are seeing more and more people under real financial pressure. Utility bills are going up, as is the cost of food and fuel, yet wages aren't increasing anything like as much. When all this is combined with sharp leaps in monthly mortgage bills, the sums just don't add up any more."
Gallacher also bemoans the lack of data as a serious problem when planning support for those in debt. She added: "Time and again we hit brick walls when it comes to assessing debt problems. There are no figures for Scotland, so the bottom line is, although we are seeing a big increase in the numbers coming to us with debt problems, we cannot judge the extent to which people are genuinely struggling. This is why I worry that it will suddenly blow up in our faces."
It can take two years or more for a householder to find themselves out on the streets. Once a borrower is six months in arrears, the lender will normally put the matter into the hands of a solicitor, who will write an initial letter asking the borrower to arrange for the debt to be settled. However, this differs from institution to institution. Some act more quickly than others.
Initially lenders try to reach some arrangement with the borrower by which they can see the debt repaid over time. If no satisfactory response is received then the lawyers move on to a calling-up notice, where effectively the debt is called in. Borrowers have 60 days in which to respond, after which an initial writ will be issued.
However, Scottish borrowers do have the right to challenge a court action for repossession, under the Mortgage Rights (Scotland) Act, to effectively freeze proceedings. They can ask for time, perhaps up to six months, to sort their lives out; perhaps to get a new job if they have been made redundant, or get back to work if they have been ill. This effectively puts the whole thing on hold.
Taylor said: "It is up to the Sheriff to decide which cases to put on hold, but they are very good at distinguishing between the homeowners who will, with a bit of time, get themselves back on track and those with little prospect of ever escaping debt-free. It doesn't help borrowers to allow them to struggle on with debts rising inexorably."
If the borrower's financial position shows little sign of improvement then the lender will apply to the court for an eviction notice.
The full article contains 873 words and appears in Scotland On Sunday newspaper.
