Arrears and repossessions still falling: CML

Repossessions and mortgage arrears have continued to decline across all categories in the third quarter of 2014, Paul Smee, director general of the Council of Mortgage Lenders, has said.

Commenting on the latest figures published by the trade organisation, he said: “Low interest rates, supported by intelligent communication and forbearance, mean that mortgage arrears and repossessions continue to decline.”

According to the figures, the proportion of mortgages with arrears, equivalent to 2.5 per cent or more of the total mortgage value, was 1.12 per cent. This was down from 1.18 per cent in the second quarter and 1.33 per cent in the third quarter of 2013, making it the lowest proportion since 2008.

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This equates to 125,100 mortgages – down from 131,400 in the second quarter and 149,400 in the third quarter of 2013.

Both the owner-occupier and the buy-to-let sector saw reductions in arrears and repossessions.

The figures showed that out of a total of 5,000 repossessions, 1,100 were on buy-to-let mortgages, representing a slightly higher repossession rate of 0.07 per cent than the owner-occupier rate of 0.04 per cent.

Mr Smee added: “Encouragingly, recent research also suggests that many households are preparing themselves for the prospect of higher interest rates, so we expect any uptick in payment difficulties to be relatively muted if and when rates do begin rising.

“Key for lenders now is considering how best to support their borrowers in planning ahead for a time when debt servicing costs are higher than they are now.”

Adviser View

Jonathan Harris, director of London-based mortgage brokers Anderson Harris, said: “Despite the third quarter seeing the highest levels of house purchase since 2007, the number of first-time buyers slipped for the second consecutive month. This reflects the market generally with the number of home movers also falling, suggesting a growing lack of confidence among buyers.

‘Encouragingly, the number of people remortgaging rose as borrowers finally begin to realise what excellent rates are available to them. There are also growing fears of an interest rate rise, which is a strong motivator in getting people off their lender’s standard variable rate.”