Lenders set to toughen stance on repossession

15 August 2011 | By Natalie Thomas

There are fears that forbearance policies are reaching their limits and that lenders will start to take a tougher stance on repossessions.

Figures out last week from the Council of Mortgage Lenders show repossessions fell 7% in the first half of 2011, compared with the same period in 2010.

There were 9,000 repossessions in Q2 2011, slightly lower than Q1’s 9,100, bringing the total to 18,100 for the first half of the year. This compares with 19,500 in the first six months of 2010. Based on these figures the CML says it has no plans to revise its forecast of 40,000 repossessions in 2011 and 45,000 in 2012.

But Mark Blackwell, managing director of xit2, says: “Arrears and repossessions are like an iceberg waiting to hit the market. There is a lot of trouble below the surface.”

He says lenders are coming to the point when it is no longer treating customers fairly to keep borrowers on extended forbearance if they have no means of ever paying off their arrears.

He adds: “We are seeing a conspicuous uplift in repossessions from one lender, driven by a change in its forbearance rules.”

He believes the CML’s estimate of 45,000 cases in 2012 is conservative.

Meanwhile, Chris Gardner, director at Obligo.co. uk, says repossession rates are being kept artificially low.

He says: “The base rate is at a historic low and lenders have shown remarkable forbearance. Together they have created a fool’s paradise, where people’s mortgage payments are comparatively low and lenders are being tolerant of late payers.

“But forbearance cannot last forever and if lenders change their approach the rug will quickly be pulled from under many, leading to thousands more repossessions.”

The CML figures also show the number of mortgages in arrears of between 1.5% and 2.5% of the outstanding balance edged up from 77,800 in Q1 to 78,500 in Q2. But arrears of more than 2.5% of the balance fell from 166,700 to 164,500. The number of mortgages more than 1.5% in arrears declined to 243,000 in Q2 from 244,500 in Q1.