Repossessions: time for a moratorium?
Repossession has always struck me as a barbaric way of treating someone who may already be facing financial problems brought about by family breakdown, illness or unemployment. But it is also clear that fear of losing the family home is so deep seated in the British psyche that the continuing rise in repossessions is one of those things, like growing unemployment, that will create the profound sense of insecurity that leads to more saving, less spending and ultimately a deeper recession.
The Government is introducing a handful of measures to stem repossessions such as a new protocol for courts and earlier financial help for those having difficulty with mortgage payments. But the Council of Mortgage Lenders seems downbeat about the likelihood of the trend doing anything other than continuing to rise.
Maybe it’s time to consider a moratorium on forced repossessions. No doubt lenders will thrown up their hands in horror. But J P Morgan Chase has taken just this step unilaterally in the US while it completely overhauls its approach to foreclosures. If the big lenders could be persuaded by the Government to institute a moratorium jointly it would remove any competitive disadvantage for a bank which announced a temporary halt. And in the end, if such a measure helped prevent a deflationary spiral in the UK, it would actually be to the medium term advantage of the banks who want to see the economy buoyant again just like everyone else.
Anyone who remembers the recession of the early 1990s will know how big a feature repossession can become in tabloid scare stories and in everyday conversation and how uneasy it leaves even those who are relatively secure in their jobs. The CML predicts 45,000 repossessions this year – that’s more than halfway to the 1991 high of 75,500 and yet unemployment and reduced hours working has quite some way to go yet. It may soon be time to consider radical measures.