Mortgage arrears down in first quarter
At 138,200 and 1.24%, both the number and proportion of mortgages with arrears of more than 2.5% of the mortgage balance were at their lowest level since the second quarter of 2008. These numbers compare with 144,600 and 1.29% at the end of the fourth quarter of 2013; and 159,700 and 1.42% at the end of the first quarter of 2013.
The number of mortgages in arrears fell in all arrears bands, including the most serious band – at the end of the first quarter, 1 in 400 mortgages had arrears equivalent to 10% or more of the mortgage balance.
Repossessions showed their usual seasonal pattern in the first quarter according to the CML data – rising a little to 6,400, up from 6,100 in the fourth quarter of 2013, but 20% down on the 8,000 repossessions in the first quarter of 2013.
These figures include both owner-occupier mortgages and buy-to-let mortgages. While direct comparisons are made more complicated by the fact that, in the buy-to-let sector, a “receiver of rent” may sometimes be appointed if the borrower defaults, the arrears rate is higher in the owner-occupier sector.
Around 1.7% of home-owner mortgages had arrears equivalent to at least three months’ mortgage payments while the proportion was around 0.9% among buy-to-let mortgages.
Commenting on the numbers, CML director general Paul Smee said: “The downward trend in the number of mortgages in arrears or ending in repossession is obviously very welcome. Repossession is absolutely the last resort – the aim is to keep people in their home and get their finances back on track wherever possible.
“Lenders fully recognise that behind the numbers these are real households with differing circumstances. They continue to improve their practices to try to achieve the best outcomes when payment problems do occur.
“Combined with low interest rates and an improving jobs market, these strategies are clearly helping many households.”
Richard Sexton, director of e.surv chartered surveyors, highlighted a North/South divide in arrears. “Although repossessions are falling, there is still a prominent North South divide in the repossessions recovery,” he said.
“Last year, eight out of ten Northern towns were home to more repossessions that the average. The North West and the North East in particular are still paying the price of recession-driven public sector job cuts, and both regions still contain many repossession hotspots.
“The introduction of MMR will help ensure repossessions remain low in the future. Many of those struggling now, are paying the price for carefree pre-crash lending. But the mortgage market won’t be allowed to make that mistake again.
“Repossessions rates are at the beginning of a long decline that is only set to continue further as the economy remains on course to recovery.”
But Mark Harris, chief executive of mortgage broker SPF Private Clients, warns over complacency: “Low interest rates and the continued forbearance shown by lenders mean the number of homes being repossessed continues to fall. But while this is welcome news, given that interest rates are so low it is worrying that there are still thousands of people getting behind on their mortgage payments and losing their homes.
“There is no room for complacency: it is important that lenders continue to be patient and work with borrowers who are in difficulty to find a solution if possible.
“While interest rates are not likely to rise for some time yet, it is important for borrowers to remember that they will eventually. It is vital that borrowers don’t overstretch themselves when taking out a mortgage and plan ahead, securing a longer-term fixed rate if necessary to provide some certainty and help with budgeting.”