Forbearance and low base rate have helped repossessions fall, says CML
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A record low base rate and increased forbearance from lenders are behind a year-on-year fall in repossessions, say industry experts.
Last week the Council of Mortgage Lenders revealed that it may lower its repossession forecast for 2011 following a 4% dip in repossessions year-on-year.
So far this year, a total of 27,500 properties have been taken into possession, 12,500 short of the CML’s forecast of £40,000 for the year.
The number of properties repossessed by mortgage lenders in Q3 2011 was 9,200, virtually unchanged from 9,100 in Q2.
There was also a slight fall in the number of households in mortgage arrears across all categories.
At the end of September, the number of mortgages with arrears of 2.5% or more of the outstanding balance fell to 161,600, down 2% from 165,200 at the end of June and 8% lower than the 175,100 cases at the end of September 2010.
Paul Smee, director-general of the CML, says: “The fall in the number of mortgages in arrears, and the stable picture on repossessions, are testament not only to the beneficial effects of low interest rates, but also to effective arrears management and good communication between lenders, borrowers and debt counselling organisations.”
Last week the Monetary Policy Committee voted to keep interest rates on hold at 0.5% for the 33rd month running. David Brown, commercial director of LSL Property Services, agrees that low interest rates and increased forbearance by lenders have helped to keep arrears and repossessions low.
But he adds: “While the CML may have overestimated the repossessions likely to occur in 2011, with the economy showing little sign of springing back to life and unemployment rising, we anticipate that arrears and repossessions will rise and that’s without the impact that an interest rate hike will have when it comes.”
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