Will we see a rise in forced sales and repossessions in 2023?

There is no doubt that there will be more repossessions than usual. There will be thousands of people whose products will be coming to and end in 2023, and who will be moving from 1% rates to rates of 6% and above. For many, this could mean very steep monthly payment increases. Some may choose to sell and move in with family, while others may default on payments and subsequently have their property repossessed. It is now time for lenders to come up with solutions, similar with the payment holidays that were put in place during Covid, to help their customers out and not go down the route of repossession. I’m hoping we see relaxed criteria around interest-only to ease the payments strain for a couple of years, at least until things settle.

Mortgage lenders have been beefing up their customer support teams this year in anticipation of an increase in borrower financial difficulties. The regulators have already made their expectations clear that lenders need to be supportive of borrowers. Mortgage payment shock will hit many, but it is anticipated that whilst the number of loans in arrears may increase, the percentage of loans that face litigation will not rise as an overall percentage. It is in nobody's interests to see forced sales and repossessions.

Forced sales and much higher numbers of repossessions seem almost inevitable, unfortunately. The scenario we're seeing play out, a sudden and unexpected jump from 1-2% mortgage rates to 6%+ is simply going to make mortgage payments impossible for many. It would have been much better if rates were raised gently over 2 or 3 years. Yes rates were much higher in the early 90s, but borrowing amounts are much higher now. And we're in the middle of a cost of living crisis, which wasn't part of the equation when lenders stress tested applicants' ability to pay. I think we'll see house prices fall by at least 20% over the next year or two.

An increase in repossessions is most definitely possible during 2023, and we are already seeing some return to the market following the restrictions placed upon banks to undertake them during Covid. However, the pandemic also showed us the power of the government to restrict the ability of the banks to undertake repossessions, and with the government hanging on for dear life, both economically and politically, it will be interesting to see if any interventions are put in place to restrict banks' ability to repossess properties.

I think it highly likely that people may end up with serious financial issues. Over the past decade, many people have pushed their borrowing to its limits. This means that if rates stay high they could be paying hundreds of pounds extra on their mortgage if they have to remortgage in the next 6-12 months. Not only this, but other variable credit commitments could skyrocket as well, such as credit cards and store cards. Increased borrowing costs, coupled with rising energy bills and the cost of living generally, could take many people to the brink and see them struggle with their mortgage payments. How lenders react, and whether the government intervenes, is the great unknown.

Those annoying stress tests that everyone moaned about and said were "unrealistic" will turn out to be the unspoken hero next year. Yes, we will see an increase in mortgage defaults and ultimately repossessions, but nothing like the numbers we would have faced if the stress tests had not been in place. We don't expect to see the mass repossessions of the early 1990's but we will see a significant increase from current levels with 2024 set to look worse as interest rates and living costs continue to climb through next year and more people exhaust payment holidays and the arrears processes with their lenders.