Keeping people in their homes
As repossessions soar – they are up 71% on last year – and millions of homeowners see the market value of their properties fall well below what they owe to the banks, the New Labour government washes its hands of the growing housing crisis.
In fact, the state-owned Northern Rock is leading the way in throwing people out of their homes, repossessing 50% more properties than the industry average. By the end of September, the state-owned lender had seized 4,201 homes, up from 2,215 at the end of last year.
Yesterday, Dai Davies, the independent MP for Blaenau Gwent, asked ministers to take possession of Northern Rock and Bradford & Bingley homes where borrowers have defaulted. The response was brutal and to the point. He was told: "Northern Rock and Bradford & Bingley are run at arm's length from the Government, on commercial principles."
The treatment meted out to former chef Karl Clark, who suffers from severe arthritis, tells you all you want to know about Northern Rock. Housebound and unable to work, he said: "I've done everything I could to keep up with my repayments, sometimes I did without medication so I could pay for my mortgage. I've tried everything to reason with them. I've been upfront from the start and told them I had money troubles because I could no longer work. I've sent copies of doctors' notes to prove I can't work."
He used his savings to pay the mortgage, but they soon ran out. Karl told his local paper: "My wife works part-time, but the money just isn't enough. I used to call Northern Rock and arrange payment deals, but then just a couple of weeks later they were seemingly forgotten about and I'd have to go through the same process again. I've got a wife and daughter and they shouldn't have to go through this. It seems that Northern Rock have been eager to kick me out of the house. Everything seems to have been fast-tracked. I got a letter from them saying they were going to take me to court. Usually this takes a few weeks, but in my case it was a few days."
As unemployment rises relentlessly in the recession, the number of people who won’t be able to pay their mortgages is sure to soar. Many have also borrowed against what was increased equity in their property. Now, as house prices fall, if they lose their homes, they will still almost certainly owe more than the current market price of the property (if it can be sold, that is). They will be homeless and in huge debt to the banks at the same time. This is simply unacceptable.
New Labour’s indifference is all the more brutal because the state has shown that it possesses enormous powers (if not the answers) when it comes to the financial crash. Commitments totalling £500 billion have been made to the banks’ bail-out. Local authorities or housing associations could, for example, be given the powers and resources to buy up homes under repossession orders and rent them back to the occupants. Of course, the Brown government has no intention of doing this.
Instead, the government is pressing on with more state-funded home-ownership schemes, even though banks have stopped lending to anyone who doesn’t have a substantial deposit. Developers have stopped building and housing associations who work in partnership with private companies cannot possibly meet their targets; associations will also face increasing financial difficulties as a result of unsold properties and unused land.
Dai Davies asks: “What is the benefit to taxpayers of keeping these banks alive, if they cannot be directed to helping people in dire housing difficulty?” Quite so. The mortgage crisis is soluble. Existing mortgage debt could be cancelled and future payments determined by a formula based on the cost of new building and ability to pay, to be agreed through the democratic process. Empty homes could be requisitioned to house the homeless. Ridding ourselves of New Labour and the business state it presides over will enable us to carry these policies into practice.
AWTW communications editor
29 October 2009