Mortgage lenders announce a fall in homeowner's debt Go compare with our comparison table

Mortgage lenders announce a fall in homeowner's debt

12 August 2010 / by Lois Avery

Mortgage debt has fallen in the second half of this year after figures showed that the number of repossessions fell.

The Council for Mortgage Lenders (CML) announced a drop of 400 to 9,400, while the number of mortgages behind with payments also fell.

The news has come as a welcome boost for the housing market and is thought to be as a result of lower interest rates, increased pressure from lenders and the introduction of Government schemes to help people struggling to keep up with their mortgage.

The decline in payment problems has led the CML to revise its forecasts for arrears and repossessions in 2010 with 175,000 mortgages to end the year in arrears, compared with the previous forecast of 205,000.

CML director general Michael Coogan said:"Mortgage difficulties have so far been contained at lower levels than we expected at the start of the year, and by comparison to the 1990s recession.

"However, the safety net for borrowers is weakened by the prospect of higher interest rates, a possible rise in unemployment, a counter-productive stigma hanging over mortgage payment protection insurance, uncertainty over future debt advice funding, reduced government support for mortgage payments, and mortgage rescue schemes being reviewed as part of the deficit reduction plan.

"While we don't want to cry wolf, it seems obvious that the ongoing prognosis for arrears and possessions is far from a healthy all-clear. We hope the coalition government will not risk undermining the chances of extending the welcome trends this year by removing support mechanisms that work."

Although the news is good for the housing market, which is in the midst of a sluggish recovery, the Consumer credit Counselling Service has warned that a rise in mortgage debt is likely to follow.

They say that the positive figures will be short lived because they are as a result of mortgage lenders’ relaxing their attitudes during the recession: "There is no doubt that lenders have shown leniency towards debtors during the recession by not enforcing suspended possession orders. However, this leniency may have been partly determined by the markets,” said CCCS chairman Malcolm Hurlston.

"In addition, some lenders are increasingly showing reluctance in allowing struggling debtors to switch to interest-only mortgages as a short term solution, giving people the necessary breathing space to find other more sustainable options."

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