Mortgages  

Arrears rate at its lowest for more than a decade

Arrears rate at its lowest for more than a decade

Fewer than one in 1,000 mortgages ended in repossession in 2015, according to the Council of Mortgage Lenders.

With less than one in 100 mortgages in any sort of arrears, at 0.92 per cent, the annual arrears rate is also at its lowest level for more than a decade.

The CML’s quarterly data also showed home-owner mortgage arrears running at 1.03 per cent of all loans at the end of the year, with buy-to-let at a lower rate of 0.31 per cent, continuing the recent trend of a fewer arrears in the buy-to-let market.

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However, the picture is reversed on repossessions, with around one repossession per 2,500 mortgages in the buy-to-let market in the fourth quarter of the year, compared with one in 5,000 in the home-owner market.

Across the whole market, most had relatively modest levels of arrears - under 5 per cent of the mortgage balance.

The number of loans with arrears in the most severe band, representing 10 per cent or more of the mortgage balance, was 23,700 - down from 24,200 at the end of 2014.

The CML stated this modest decline in the most serious arrears band may partly reflect distortions in the timing of possessions, but the overall arrears trend is clearly down.

CML director general Paul Smee said: “At the risk of sounding as if we are crying wolf, we would continue to urge all borrowers to plan ahead for a time when the interest rate environment may be less benevolent.

“Lenders do not wish to see borrowers who are coping currently falling into difficulty if and when rates do eventually rise.”

Jonathan Harris, director of mortgage broker Anderson Harris, agreed that there is no room for complacency.

“There are still many homeowners being repossessed or finding themselves in arrears on their mortgage each year, which begs the question: what will happen when interest rates start to rise?

“While it looks highly unlikely that interest rates will rise anytime soon, borrowers still need to plan ahead and consider how they would cope with higher mortgage rates.”

He added that it is vital borrowers keep their lender in the loop if they are struggling with their mortgage.

peter.walker@ft.com