40,000 Repossessions on the cards, warns CML
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Fears are growing that repossessions could surpass the 40,000 mark this year as lenders’ forbearance measures reach their limits.
Last week the Council of Mortgage Lenders revealed that repossessions were up 15% in Q1 2011 compared with Q4 2010. Some 9,100 properties were repossessed in Q1 up from the 7,900 in Q4 2010.
There was a drop in the number of mortgages with arrears equivalent to 2.5% or more of the outstanding balance, falling from 170,000 in Q4 2010 to 166,900 in Q1 2011. But arrears of 10% or more increased slightly from 27,400 in Q4 2010 to 27,700 in Q1 2011.
Ian Long, managing director of St Trinity Asset Management, says: “The CML forecasts there will be 40,000 repossessions this year, but if the base rate is hiked earlier or more severely than anticipated, this figure may prove to be a huge underestimate.”
And Paul Diggle, property economist at Capital Economics, says against a backdrop of subdued wage growth and weak labour market, the rise in repossessions seen in Q1 is unlikely to be the last.
He adds: “The CML reported that at 9,100 repossessions in Q1 were up by 1,200, or 15%, compared with Q4 2010. That was the first such rise since Q3 2009 and may be a sign that lenders’ forbearance is approaching its limit.”
Last week Mortgage Strategy reported that the Financial Services Authority is concerned that lenders are using unnecessary forbearance measures to mask the true number of borrowers that should be in arrears.
Michael Coogan, director-general of the CML, says: “Lenders have a range of options to nurse borrowers through temporary problems, but will clearly need to be mindful of the regulator’s concern that too much forbearance may be as bad as too little.”
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