CML: Arrears and repossessions decline

Nia Williams

August 14, 2014

Just 1.18% of mortgage holders are in arrears of 2.5% of more, down from 1.38% a year ago, with the total number falling from 154,900 to 138,200.

A total of 5,400 properties were repossessed in the second quarter, down from 6,400 in Q1 and 7,600 in Q2 2013.

Paul Smee, CML director general, said: “Another fall in arrears and possessions is clearly welcome and shows that borrowers, lenders and money advisers are generally continuing to work well to contain payment problems where they arise, helped by an improving economy and low interest rates.

“But rates will rise at some stage, of course, and borrowers should be planning for that now.”

At 11,800, the number of possession cases in the first half of 2014 were the lowest since the second half of 2006.

The number of buy-to-let mortgages in arrears of at least three months stood at 13,400 at the end of June, down from 14,700 three months earlier and 17,900 a year ago. Just 1,300 buy-to-let properties were taken into possession in Q2 2013, compared to 1,400 in the previous quarter and a year ago.

Smee added: “We welcome the message from the Bank of England that, when it raises rates, it plans to do so in a series of ‘baby steps’, matched to a careful assessment of the ability of households to deal with higher borrowing costs.

“Any borrower anticipating payment problems should talk to their lender as soon as possible. Today’s figures continue to show that in many cases it is possible to work through a period of difficulty, with lenders committed to helping borrowers get their finances back on track.”

The CML forecasts 135,000 mortgagers to be in arrears by the end of 2014, while they predict 25,000 cases of repossession.

Commenting on the data, Richard Sexton, director of e.surv chartered surveyors, said: “The sustained period of low interest rates has allowed struggling homeowners time to strengthen their finances and wipe away debts. Simultaneously, the jobs market has started to pick-up and inflation has been falling. Repossessions rates have fallen to pre-recession levels as a result – a further sign that the economic recovery that is revving along nicely.

“Rock-bottom interest rates cannot last forever. But yesterday’s inflation report confirmed that an interest rate rise is still some way off – and that its eventual arrival will be slow and gradual. Hiking interest rates would rapidly push up repayments, and so delaying the rate rise will offer further reprieve for struggling borrowers.

“Linking the rise to real wage growth is also a smart move – otherwise a rise in costs, before a rise in wages could see borrowers falling behind on repayments again. In the meantime, new regulation has been designed to ensure any new borrowers are properly prepared for a base rate rise – and aren’t lured in by the false certainty low interest rates promise.”

Jonathan Harris, director of mortgage broker Anderson Harris, is still concerned about the impact of potential interest rate rises: “Repossessions continue to fall, while the number of borrowers in arrears has also declined. This is to be expected with rock-bottom interest rates and improving employment numbers, as well as lenders being prepared to be flexible and show forbearance.

“However, there are still tens of thousands of homeowners being repossessed each year, which begs the question: what will happen when interest rates do start to rise? How will people cope? We suspect that when it comes to their finances there are many people teetering on a knife edge and rate rises could easily push them over. Any rise in interest rates must be gradual and we welcome indications from the Bank of England that this will be the case.

“Nevertheless, borrowers must keep their lender in the loop if they are struggling with their mortgage. It is much easier and less stressful to come up with solutions early on than further down the line when the options may be much more limited.”

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