How Does Recession Affect Auctions?

With the economic climate in crisis it’s understandable that every sector of the housing market is struggling. First-time buyers have been pushed right out of the market. House prices are falling. Mortgages are harder and harder to come by. Everyone in the UK and indeed across the world is feeling the pinch. However there is one area of the housing market that has actually flourished as a result of the credit crunch and that is property auctions.

Property auctions are becoming more and more prominent and that is as a result of the rise in repossessions. While many properties at auction are new build or upmarket a large number are repossessed houses that the lender who repossessed them wants to get rid of as quickly as possible. As a result they are on offer for, usually, quite a large discount.

Why are Houses Repossessed?

Houses are repossessed when a homeowner cannot afford to keep up with his or her mortgage payments. The lender will tell the borrower when he or she has missed a payment. This acts as a warning. If he or she then continues to miss payments the lender will have no choice but to repossess the house. A surveyor and bailiff will visit the house, change the locks and tell the occupants they must leave.

Why are Repossessions on the Increase?

These are tough times in the mortgage industry. The fall out from the US sub-prime crisis has meant many homeowners are finding it difficult to meet their mortgage payments. Lenders have tightened their criteria and the deals on offer now are not the same as they were, even twelve months ago. Anyone coming off a fixed rate mortgage will have found themselves struggling to find a deal that is even close to the one they had before.

How can Homeowners Avoid Repossession?

Repossessions are devastating for home owners. Imagine, you’ve spent years creating your family home, all the little touches that make it yours and then an economic downturn or a financial mistake means you are left with nothing. Worse still, you’re present while a surveyor and bailiff come in and take away everything you’ve worked so hard for, all those memories.

But there are ways of avoiding repossession if you are careful. Obviously meeting all your mortgage payments is the way to avoid repossession, but this is the real world and this isn’t always possible. No one expected the credit crunch so few people where prepared. One way of preparing for unforeseen circumstances is to take out mortgage payment protection insurance. This insurance will cover your mortgage payments for a period of time should you run into difficulty and this gives you time go get back on your feet, financially.

Also remember that you should always talk to your lender and your broker when you run into trouble. Keeping everything bottled up doesn’t help. The lender does not want to repossess the property and will try to help if you tell them you are struggling. Your broker may be able to set up payment holidays. Don't suffer alone.