The Council of Mortgage Lenders has urged borrowers to plan for an interest rate rise, following the Bank of England’s statements on potential rate increases.
Speaking at the publication of the Bank of England’s quarterly inflation report yesterday (13 August), governor Mark Carney said ‘normal’ interest rates are unlikely to be higher than those of “yesteryear” and signalled they were unlikely to be moved this year.
He forecast rates would move incrementally on a quarterly basis and hit 2.25 per cent by the first quarter of 2017.
However, the CML warned that people should prepare for interest rate rises sooner rather than later, as it published positive mortgage arrears and possession data which show both continued to decline in the second quarter of 2014.
Arrears now stand at the lowest level since the first quarter of 2008, with possessions at their lowest since the second half of 2006.
The number of mortgages in arrears of 2.5 per cent or more of the balance stood at 131,400, equating to 1.18 per cent of all mortgages, at the end of June. This is down from 138,200 mortgages from the previous quarter.
A total of 5,400 properties, representing 0.05 per cent of all loans, were taken into possession in the second quarter, down from 6,400 in the preceding quarter.
The number of buy-to-let mortgages in arrears of three months or more stood at 13,400 at the end of June, down from 14,700 three months earlier. In the second quarter, 1,300 buy-to-let properties were taken into possession, compared to 1,400 in the previous quarter and a year ago.
The CML said the data is broadly in line with its revised arrears and possessions forecast.
Paul Smee, CML director general, said: “Another fall in arrears and possessions is clearly welcome and shows that borrowers, lenders and money advisers are generally continuing to work well to contain payment problems where they arise, helped by an improving economy and low interest rates.
“But rates will rise at some stage, of course, and borrowers should be planning for that now.
“We welcome the message from the Bank of England that, when it raises rates, it plans to do so in a series of ‘baby steps’, matched to a careful assessment of the ability of households to deal with higher borrowing costs.
“Any borrower anticipating payment problems should talk to their lender as soon as possible.”
