Council of Mortgage Lenders director general Paul Smee has dismissed the idea that an increase in base rate will lead to a wave of new repossessions.
Giving evidence to the Treasury select committee today, Smee was asked whether an increase in base rate will lead to an increase in the number of repossessions.
Smee said he expected the number of repossessions to go up but said this would not number in the ”tens of thousands” due to lenders’ approach to forbearance and spotting early the borrowers who are about to get into financial difficulties.
He said: “There may be an up-tick from the very low levels now but I don’t think there will be tens of thousands [of repossessions when base rate goes up].
“The analogy is that I do not believe that there is a floodgate that will open. It may pick up but it will still be relatively low because of the changes we have seen in the intervening years.”
There were roughly 30,000 repossessions this year, while the CML predicts this will fall to around 28,000 next year but will rise to 30,000 in 2015.
Giving its forecasts for 2014/15 last week, the trade body warned the ’benign period of arrears and repossessions may be coming to an end”, although it added most households will cope with the transition to more “normal” interest rates.
Separately, Smee was asked whether the scrapping of the Mortgage Rescue Scheme will lead to a more “hard-nosed” approach to forbearance than at present.
The scheme was designed to help those in financial difficulties stay in their home. The scheme closed to new applicants in London on 15 October this year and will close to those in the rest of England on 31 March 2014.
There are two elements to the scheme: an equity loan scheme, where a housing association provides a secured loan to the borrower to lower their monthly mortgage payments; and the Mortgage to Rent element, where the borrower would sell their home to a registered provider and rent back the property.
Between 2009, when the scheme launched, and last month, only 5,403 households had used the scheme to ensure they could stay in their home.
Smee said he believed scrapping the scheme would not lead to a shift-change in the way lenders approach forbearance.
Smee said: “Relatively few people have accessed the mortgage rescue scheme, which is one of the reasons why it has been removed.
“I think [the scheme] was a very useful catalyst for driving the change in [forbearance] culture but I think the change in approach is now so embedded that I wouldn’t regard the removal of the scheme as indicative that the culture would necessarily change.”