Mortgage repossessions lowest since crash
The number of repossessions represented 0.26% of outstanding mortgages in the fourth quarter of 2013, with 28,900 cases. Comparatively 0.3% of mortgages ended in repossessions in 2012, coming to 33,900.
Arrears are in decline, as at the end of 2013 1.29% of mortgages were in arrears to the value of at least 2.5% of the loan balance compared to a 1.88% peak in Q3 of 2009.
Paul Smee, CML director general, said: “Mortgage arrears and repossessions continue to fall, with low interest rates, relatively strong employment, and lender practices all combining to keep most people in their homes even if problems arise.
“Lenders recognise that temporary changes to circumstances can knock households off track – we only need to look at the experiences of households affected by flooding right now to realise that life can contain unpleasant and unforeseen shocks.
“Anyone facing difficulty should talk to their lender, who will try to work with them towards a plan that will get them back on track so that they can sustain their home-ownership for the long term.”
Repossessions have fallen since their most recent peak in 2009, aided by low interest rates, growing employment and effective arrears management.
Arrears cases have declined across all categories, including the deepest arrears band of 10% or more of the mortgage balance.
Jonathan Harris, director of mortgage broker Anderson Harris, said: “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.
“Unexpected events often cause problems when it comes to paying the mortgage. The flooding which has hit much of the country could be one such factor so RBS’ decision to allow homeowners affected by flooding a three-month repayment holiday on their mortgage is welcome. Other lenders should follow suit and borrowers should ask their lender whether it would consider doing something similar if they are at all worried about finding the extra cash to make good the damage caused by the floods.
“Even if flooding is not an issue, it’s important that borrowers 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 earlier on than further down the line when the options may be much more limited.”
George Spencer, CEO of Rentify, the UK’s fastest-growing lettings agency, added: “It is encouraging to see that arrears of over three months for buy-to-let mortgages stand at just over 1% in 2013 compared with almost 3% in 2009. This is moving in the right direction and a reflection of a strong private rented sector, with landlords properly managing their finances at a time of ultra-low interest rates.
“The past year has seen a significant increase in the number of tenants over the age of 30, which now make up 60% of the rental market, an increase of nearly 6 per cent since January 2013. The number of families renting has also increased in most parts of the UK, especially London. This has all come at the expense of younger renters, who have either been attracted away by Help to Buy or are still living with parents. In London 22% of 20-34 year olds still live in the family home.
“Older renters and families tend to want to stay put for longer, so this provides stability of tenure for landlords and helps avoid voids. There is also a long term trend in favour of renting over buying. Partly a result of immigration from Europe, where renting is more common and partly an attraction towards the flexibility renting offers.”
And Ashley Brown, managing director of independent mortgage broker and financial advisers, Moneysprite, said: “It’s highly encouraging that both arrears and repossession numbers continue to fall as first time buyer numbers increase.
“There’s no doubt that the recent economic downturn failed to have the impact of other crises because interest rates were dropped to such a low level.
“Households that would otherwise have struggled to maintain their payments were thrown the lifeline of 0.5% rates and many thousands have stayed afloat as a result.
“Along with much more accommodating lenders, the arrival of more competitive rates at higher LTVs has also made it easier for people to maintain their mortgage payments.
“When rates rise it’s almost certain that arrears and repossessions will rise, too. By how much depends on how quickly, and by how much, rates rise.
“Only this week Mark Carney reiterated that even when rates do go up they will be going up at a very sensitive pace.
“The Bank of England knows that raising interest rates will be like taking the patient off life support. It will have to be done with extreme care or a relapse is a very real possibility.”