Lowest repossession rate since 2007, CML

The total number of properties that have been repossessed by first-charge mortgage lenders in 2011 was 36,200, the lowest annual total since 2007, data from the Council of Mortgage Lenders has shown.

For the fourth quarter of 2011, the number of repossessions was 8,500 - nearly 9 per cent down from 9,300 in the third quarter, but 5 per cent up from 8,100 in the fourth quarter of 2010.

On arrears, there continued to be a modest improvement across all arrears bands in the fourth quarter, and in 2011 as a whole compared with the previous year. At the end of 2011, 159,400 mortgages had arrears equivalent to 2.5 per cent or more of the mortgage balance, 7.5 per cent down from 172,400 at the end of 2010.

Buy-to-let properties accounted for 5,900 of the repossessions in 2011, up from 4,700 in 2010.

Although arrears and repossessions throughout 2011 were “fairly stable”, the CML has no current plans to revise its current 2012 forecasts for the year.

However, it warned that worsening unemployment and continuing pressures on the cost of living seem likely to result in some further deterioration in the position of households in 2012. The CML anticipates that this is likely to result in around 45,000 repossessions and around 180,000 mortgages in arrears of 2.5 per cent or more by the end of the year.

In addition, Ray Boulger, senior technician at broker John Charcol, told FTAdviser that the repossession rate could be affected by the regulator’s closure of the sale and rent back market, as borrowers will no longer have a “last resort” lending option.

Paul Smee, director general at the CML, admitted that low interest rates and good arrears management by lenders are helping the vast majority of those borrowers who face difficulties to keep their homes and get back on track.

He said: “This will continue, but in the face of wider economic difficulties and rising unemployment, we are concerned that there will be a higher number of people facing more serious problems in 2012.

“Anyone worried about their finances should talk to their mortgage lender and take advice on their other debts as soon as possible. This will give them the best possible chance of staying in their home even if they have a spell of financial difficulty. Forbearance cannot be indefinite; but for most households arrears are temporary and can be resolved.”