CML reports 40,000 repossessions in 2008

Figures from the Council of Mortgage Lenders released today show 40,000 people lost their home last year, representing 1 in 290 mortgages and up from 26,200 in 2007.

Around 10,400 properties were taken into possession by first charge mortgage lenders in the fourth quarter of 2008, down from 11,100 in the previous quarter but up from 6,900 in the fourth quarter of 2007.

The total number of first-charge repossessions in the year was an estimated 40,000. This was 5,000 lower than the CML’s original forecast for the year.

The fact that there were 11% fewer repossessions than expected, despite a worsening economy and rising unemployment, demonstrates that mortgage lenders are making strenuous efforts to ensure that repossession really is a last resort claims the CML.

It also says it is important to recognise that repossessions include a proportion of abandoned properties and property fraud.

They also include buy-to-let repossessions, as well as home-owner repossessions.

At the end of 2008, around 182,600 mortgages – or 1.57% of the total – had accumulated arrears equivalent to 2.5% or more of the outstanding balance – for example, £2,500 or more on a £100,000 balance (a £97,500 mortgage plus £2,500 arrears).

This compares with 1.29% at the end of the third quarter of 2008, and 1.08% at the end of 2007.

On a “number of months” basis, 219,100 mortgages were in arrears of more than three months at the end of 2008, up from 166,600 at the end of the third quarter of the year, and up from 127,500 at the end of 2007.

However, the big reduction in mortgage rates experienced in 2008 was a significant influence on the rise in the number of arrears cases measured on a “number of months” basis – as the same given sum of arrears represents a higher number of months payments as interest rates fall.

Michael Coogan, director general of the CML, says:”Despite the upward pressure on mortgage arrears and repossessions arising from the problems in the economy and rising unemployment, both lenders and government are continuing to find more ways to help more people stay in their homes.

“But there seems to be a sharp rise in cases where borrowers are handing back their keys or abandoning their properties. We strongly urge borrowers to contact their lender and work with them before taking this step, as there may be other solutions.

“Borrowers are still liable for their debt, even if they leave the property, so working through their problems is much more likely to be in their best interests.”

“We know the plethora of schemes and initiatives is daunting, and we are working closely with government and advice agencies to try to simplify the information available, and ensure that those borrowers who may qualify for help get access to the information and advice that they need at the right time.”