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Mortgage arrears fall to record low: UK Finance

Mortgage arrears fell to a record low in the third quarter of this year, according to new figures published by UK Finance.

But despite this more positive picture, the figures show that the number of repossessions has started to edge upwards again.

In total there were 88,300 mortgage in arrears of 2.5 per cent or more of the outstanding balance. This figure is down 2 per cent on the second quarter of this year – and is the lowest figure since 1994, when these figures were first collated.

To put this in context there were more than 200,000 mortgages in arrears in 2009, in the wake of the financial.

The number of properties taken into possession in the third quarter of this year nudged upwards to 1,900, an increase on the 1,800 repossessions seen in the second quarter of this year.

Although this figure is higher, the previous quarter was a record low, and UK Finance pointed out that this figure was still significantly below the 12,000 plus repossessions that were recorded each quarter during 2009.

Looking at the split between buy-to-let properties and owner-occupier properties, the buy to let arrears remained flat, apart from a small increase in those with higher level of debts.

Overall the number of buy-to-let mortgages in arrears increased by 2 per cent to 5,100.

When it comes to repossessions the number of owner-occupied repossessions increased in the third quarter (from 1,100 to 1,300), while the number of buy-to-let repossession fell (from 700 to 600).

UK Finance’s head of mortgages policy June Deasy says: “Even a small rise in mortgage possessions is disappointing but, after a long period of declining numbers it was inevitable that they would rise again at some stage. Both arrears and possessions remain low by historical standards and look set to be lower for the year than we predicted at the start of 2017.

“We expect the vast majority of mortgage borrowers to continue to manage their finances successfully but they should continue to keep their plans under review. Lenders remain committed to working with borrowers to keep them in their home wherever possible and possession continues to be the last resort.”

Anderson Harris director Jonathan Harris points out that these numbers will not include the effects of the recent interest rate rise. “With more rate rises a possibility home repossessions may well increase further,” he says.

“Clearly there is no room for complacency. Possessions have long been declining but that can change and borrowers need to be prepared. We suspect that when it comes to their finances there are many people who don’t have a buffer to tide them over should they get into difficulty.”

He adds that lenders are being “flexible and showing forbearance” – but says it is easier for them to come up with solutions when homeowners talk to them when problems first arise.

Former RICS chairman and estate agent Jeremy Leaf adds: “These figures show on the one hand that low interest rates have helped keep arrears in check, but on the other possessions edging up is evidence of increased lender confidence in selling properties owned by those in greatest debt.

“Looking forward, upward pressure on interest rates is likely to increase arrears as borrowers ‘on the margins’ always tend to be most vulnerable.”

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