Mortgages  

Repo rate to fall as household budgets recover

The director of business intelligence at HML, the mortgage administration and servicing company, said the mortgage market looked better for most people in England and Wales, although there were still repossession hotspots in Northern Ireland and Greater London.

He said: “This could reflect an improving economy, with the unemployment rate standing at 7.1 per cent and house prices rising. However, this could also be a double-edged sword for mortgage customers.

HML’s latest regional repossession forecast suggested Northern Ireland and Greater London would have the highest number of repossessions this year.

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According to HML data, Northern Ireland will have the highest repossession rate at 0.82 per cent, representing 2606 properties. Greater London has a repossession rate forecast of 0.33 per cent, or 2993 properties.

Mr Riley added: “On the one hand, the economy is showing signs of improvement, but on the other, higher levels of free equity where the borrower is in arrears and cannot make mortgage payments could have an influence on the lender’s decision to repossess.

“Inflation may have fallen to the Bank of England’s 2 per cent target, but wage growth stands at less than 1 per cent. Household finances are still going backwards, albeit at a slower pace.”

He said the question needed to be asked whether lenders would become tougher during 2014 as property prices climbed amid “perceived” improving household finances, adding: “If this scenario happens, repossessions could actually be higher than we have forecast.”


Region

Repossession rate forecast 2014

 
UK forecast by volume

East of England

0.21%

1,892

East Midlands

0.20%

1,604

Greater London

0.33%

2,993

North

0.28%

1,117

North West

0.22%

2,345

Northern Ireland

0.82%

2,606

Scotland

0.23%

2,399

South East

0.23%

2,961

South West

0.18%

1,425

Wales

0.29%

1,466

West Midlands

0.29%

2,299

Yorkshire & Humb

0.22%

1,950

Total

0.24%

25,057

Source: HML

Adviser view

Commenting on the forecast rate for Northern Ireland, Belfast-based mortgage adviser James McNeill said: “This comes as no surprise. The property market is depressed here. We did have a particularly strong property market, so when the bubble burst here, it had a bigger impact.

“Northern Ireland is not the most economically blessed part of the UK, so a combination of economic factors and the bursting of the property bubble has promoted an above-average rate of repossessions.”