Lenders Selling Repossessed Properties Cheaply

Since the start of the credit crunch four years ago, UK mortgage lenders have sold repossessed properties at an average discount of 23% compared with 13% prior to 2008.

The analysis comes from Fitch Ratings in a new report 'UK Residential Property Value Analysis'.

The time mortgage lenders take to sell possessed properties over the same period has decreased, implying that lenders are willing to sacrifice on price in order to achieve a timely sale.

Due to a combination of relatively lower house prices and increased sale discounts, lenders are suffering losses on a greater proportion of properties they take into possession. Prior to 2008, 34% of repossession cases suffered losses, but this has increased to nearly 87% from 2008 onwards, implying that most of these loans were originated at the peak of the market and at higher loan-to-value ratios.

Fitch also highlights a north/south divide in the level of repossessions in England. "The concentration of possessed properties in the north of England (North-East, North-West and Yorkshire) is almost twice that of the south (London, South East and South West), " said Gregg Kohansky, EMEA head of RMBS at Fitch. "This is partly explained by larger increases in unemployment and larger declines in home prices in the north of the country."