Mortgage arrears and repossessions lower than expected

Mortgage arrears and repossessions lower than expected

12 February 2010 / by Rachael Stiles

The number of homes that were repossessed in 2009 was significantly lower than originally predicted, with 46,000 people losing their homes, compared to what was expected by the Council of Mortgage Lenders.

At the beginning of 2009, the CML forecast the there would be 75,000 repossessions, more recently recalculated to 48,000.

The latest figures from the CML show a 15 per cent year-on-year increase in repossessions, amongst residential and buy to let mortgage customers, but they also show that repossessions were starting to drop rapidly towards the end of the year.

The fourth quarter of 2009 saw 10,200 properties repossessed, a13 per cent fall compared to the previous quarter, and a two per cent decline on the same quarter in 2008.

The CML was also pessimistic about mortgage arrears, predicting that 195,000 homeowners to be experiencing payment difficulties by the end of 2009, but, while three per cent more homeowners were struggling to pay their mortgage than at the end of 2008, it was not as many as expected, at 188,300 borrowers.

Arrears were also beginning to improve by the end of the year, showing a three per cent decline in quarter four compared to the previous three months.

The CML believes that householders with lower levels of arrears are being assisted by low interest rates, while those in higher levels of arrears have managed to stabilise their arrears but not repay them.

Commenting on the figures, Michael Coogan, CML director general said arrears were lower than expected due to "low interest rates, and a great deal of concerted effort by lenders, government and the advice sector to help borrowers to address financial difficulties when they occur."

But, the CML warns against assuming that these figures suggest the housing recovery will now run smoothly, as interest rates could increase sooner than expected if inflationary pressures build on the Bank of England.

"We are not out of the woods yet - 2010 will still be a challenging year for many borrowers, and some households will inevitably find their finances being squeezed if and when interest rates do eventually rise," Mr Coogan continued.

"But borrowers should feel reassured that lenders want to help them keep their homes wherever possible. The vast majority of people who get into arrears manage to keep their homes, and will do so even if interest rates rise. Seeking advice as soon as financial problems occur will help to minimise the risk of the situation getting out of control."

Responding to the statistics, Ian Potter, operations manager of the Association of Residential Letting Agents (ARLA), said: The Government's initial response to the threat to Britain's homeowners - and tenants - was slow and disjoined but the statistics suggest that the worst case scenario has been avoided, for now."

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