Loans go bad as British housing bubble pops
MANCHESTER, ENGLAND — When Shirley Hale's husband dumped her for a younger woman and moved to the Czech Republic, Hale didn't get mad. She got a new house.
After selling the family home in 2002, she bought a house in the suburbs of this old industrial city in northern England and took out a mortgage to fix it up. By last year, though, Hale had fallen behind on the payments on her "gorgeous little place" and was looking at foreclosure -- until a sales agent for a mortgage "rescue" company stopped in.
Hale signed over her house for $50,000 less than what it was worth. In return, she says, she was told she could live in it as long as she wanted if she paid the company $600 a month. Six months later, Hale learned her home had been sold and the mortgage transferred to one of Britain's major sub-prime lenders. Hale had 28 days to get out.
"I don't even know who owns it now," Hale, 72, said wistfully in an interview in the tiny public-housing apartment she lives in now. "It's empty still. . . . The garden shed has been stolen, all my built-in kitchen has been smashed to pieces, the wallpaper's been ripped off. . . . They could have let me stay."
The American sub-prime mortgage crisis has received attention worldwide, and European officials have been quick to blame lax U.S. oversight of lenders for the international credit crunch that has crippled banks and sent shock waves through the financial markets.
But Europe has its own burgeoning mortgage meltdown -- in Britain.
After years of watching house prices soar even faster than those in America -- modest three-bedroom tract houses in the London suburbs were going for $2.2 million at one point -- Britons are now weathering a sharp rise in mortgage defaults.
Moreover, many debt-laden homeowners have no means to salvage their properties because favorable loans are suddenly harder to get. Desperate consumers are increasingly turning to costly and confusing financial rescue plans that often end, later if not sooner, in the loss of their homes.
The Financial Services Authority, which regulates banking in Britain, warned last month that 1.4 million mortgage holders will face interest-rate resets on their loans this year, with payment hikes of up to $420 a month.
Repossessions -- the British term for foreclosures -- jumped 21% last year, with filings against more than 27,000 homes, according to the Council of Mortgage Lenders.
