The excess of the property boom in the UK when tens of thousands of people were given mortgages they couldn’t really afford has resulted in the country being seen by bargain hunters as a preferred target as re-possessions rise.
Not only are foreign real estate investors increasingly viewing London as one of the best value place to buy, but the practice of lending more than a property is worth is fuelling the repossession figures and adding to the clamour.
On the one hand more than 12,000 Northern Rock customers handed 125% mortgages have fallen behind with their monthly payments as the full scale of the bank’s disastrous lending has been revealed for the first time.
And on the other those dealing in distressed property assets are reporting a huge rise in the number of inquiries from abroad, particularly from the United Arab Emirates, Australia, the US and Cyprus.
Northern Rock, which had to be bailed out to the tune of £26 billion by the UK government last February, should have pulled its popular Together loan of 125% as soon as it knew the extent of its cash crisis, experts said.
‘It was a shortsighted decision not to pull these deals immediately as soon as the bank got into trouble. It’s left thousands of people unable to pay, unable to sell and unlikely to rebuild their futures quickly with the taxpayer currently picking up the bill,’ said Katie Tucker, of mortgage brokers Mortgageforce.
As it continued to issue the controversial home loans for several months after getting into financial trouble there are now tens of thousands who can’t afford them and are facing a forced sale.
The bank also admitted problems with other home loans, saying the total number in arrears had risen to 3.92% from 3.67% at the end of March and 2.92% at the end of last year. Now one in 25 of its borrowers are failing to meet their monthly payments.
Distressed Assets, a Liverpool based company which specialises in sourcing bank repossessed property, said the trend was encouraging foreign investors. ‘Many of the investors are seasoned business people who view the present economic climate as a buying opportunity and understand the significant value in UK bank repossessed property,’ said Director Dominic Farrell.
The latest mortgage arrears and repossession figures are due to be published by the Council of Mortgage Lenders next week. Could more bad news really prompt a UK property boom?