The Council of Mortgage Lenders’ Q2 arrears and repossession statistics are not the economic silver lining they might seem.
The decreases are probably attributable to the low interest rates and lender forbearance. If interest rates were not so low more people would fall behind with mortgage payments and repossessions would increase.
The drop in unemployment is also welcome news on the surface but is unlikely to be sustainable.
As the coalition government tackles the deficit and rips into the public sector, unemployment is likely to increase with people unable to make mortgage payments.
Government spending cuts will have a ripple effect as industries reliant on public spending cut back, leading to more unemployment and rising mortgage arrears. Growth in the private sector is unlikely to keep up with public sector decline.
While lender forbearance may be helping to keep repossessions low, Treating Customers Fairly considerations will need to be kept in mind to protect borrowers from unnecessarily high debt shortfalls.
If a borrower cannot meet payments or remortgage putting off repossession may not be best. All must be done to keep their home but in a managed way that protects both parties.
What happens if the situation worsens? Of even more concern is the possibility that debt advice and mortgage support schemes will be victims of the spending cuts, leaving people with nowhere to turn to for help.