The number of distressed properties being sold at auction in London has increased during the last three months, reflecting a rise in repossessions.
Mortgage lenders took 5,630 properties into possession in the second half of last year, and evidence suggests that many of these are being sold at auction.
Figures from the Council of Mortgage Lenders released this week showed a 70% increase in total repossessions in 2005 to 10,250, with levels rising by 22% in the last half of the year.
Though the incidence of repossession is historically low compared to the peak of 38,930 in the second half of 1991, several auction houses have seen a noticeable increase in the number of enforced sales coming onto the market.
“We have noticed more distressed sales over the past 12 months, particularly during the past three months. Our December catalogue contained 81 out of 131 lots that were distressed,” said Jamie Clarke, Harman Healey’s business development manager.
“It could be a consequence of people coming out of fixed mortgages over the past three months and finding the increase difficult if they mortgaged beyond their means,” he said.”
Gary Murphy, Allsop’s residential auctioneer, said: “February’s catalogue contains about one-third distressed stock, perhaps as a result of aggressive competition among lenders, and failed mortgages granted at high loan-to-value ratios to uninitiated buy-to-let investors and owner-occupiers with little cash.”
Chris Glenn, auctioneer and divisional manager of Barnard Marcus, said: “My suspicion is that we are seeing some repossessions from the BTL sector, possibly where people have bought brand new and off-site on fixed mortgages that have reverted to the standard variable rate which, although low, may force them to pay a mortgage they’d expected to be covered by a tenant.”
