Causes of House Repossession in UK

Every month, between 650 and 950 homes in the United Kingdom are repossessed, which works out to between 7,800 and 11,400 homes annually. House repossession is an economically traumatic event, and will trigger a domino effect on the finances of victims for years, if not decades, to come.



There are three primary reasons behind repossession of property. They are:


1. Mortgage Default


Most Britons apply for a mortgage when buying their homes, and these mortgages, or loans, are provided by banks and financial institutions, or lenders. The loans provided are to be repaid with interest within the timeframe stipulated in the agreement between lenders and borrowers.


When borrowers fail to repay the loan as per the agreed upon schedule, regardless of the reason, lenders can legally seek the permission of the court to repossess the property in question under the purview of the Land and Conveyancing Law Reform Act 2013. Once the property has been repossessed, the property will then be auctioned off to recover the amount loaned out.


What many people fail to realise is, lenders actually dislike repossessing homes as their profit margin are greatly reduced. They would also have to spend a lot of internal resources to pursue legal recourses. It is far more profitable for them to continue receiving repayment from borrowers. This is why they are actually quite open to negotiating with borrowers before commencing legal action.


2. Loan Security


Homeowners sometimes apply for a loan from banks using their homes as security. Such is the need for money, brought upon by factors such as loss of employment, business difficulties or health expenses, many are willing to risk the roof over their head for a temporary financial respite.


Alas, if they default on the loan, lenders will attempt to recover their money by repossessing the house and selling them by auction.


3. Bankruptcy or Sequestration


Bankruptcy is a legal form of insolvency. It occurs, whether voluntarily or otherwise, when people are unable to service their debts or loans worth over £5,000, and have no means of meeting their obligation in the future even through a Debt Relief Order or an Individual Voluntary Agreement.


When a person is declared bankrupt by the Insolvency Service (England and Wales), Accountant in Bankruptcy (Scotland), or the High Court (Northern Ireland), the court will authorise for the disposal of their assets to repay their debts and loans. The usual assets include cars and houses. The court will issue a house repossession order in such instances.


Although people can be discharged from bankruptcy after a period of 12 months, the status will be seen in their credit file for at least six years – and no bank will loan money to them as long the bankruptcy remark remains in their file.


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