12th February 2015
Property repossessions in the UK dropped substantially last year falling to the lowest level since 2006 according to new numbers from trade body the Council of Mortgage Lenders (CML).
Last year witnessed 21,000 repossessions, 26% less the 28,900 clocked up in in 2013 and with the repossession rate down to 0.19%, it marks its lowest level in eight years.
Out of the 21,000 total number of repossessions, 16,100 were on owner-occupied properties, and 4,900 were on buy-to-let properties.
At 0.3%, the repossession rate on buy-to-let mortgages was higher than the 0.17% on owner-occupier loans, despite the fact that the underlying arrears rate was lower on buy-to-let lending than on home-owner lending. The CML asserted that this is unsurprising, as lenders offer extended forbearance to owner-occupiers to help them get through periods of financial difficulty without losing their home.
In addition the analysis found that there were also fewer mortgages in arrears at the end of 2014 than at any time since 2006. Just over 1.05% of all mortgages were in arrears equivalent to 2.5% or more of the mortgage balance – down from 1.29% at the end of 2013 and 1.12% at the end of the third quarter of 2014.
In numerical terms, this equates to 116,800 loans – down from 124,400 at the end of the third quarter, and 144,600 at the end of 2013.
Within the total number of mortgages in arrears, there was also a decline in all of the individual arrears bands. Even among the heaviest arrears band – more than 10% – there was a 14% decline year-on-year to 24,700 cases at the end of 2014 – 5% lower than at the end of the third quarter.
The two main traditional drivers of mortgage difficulty are income shocks such as unemployment and interest rates. Both factors are relatively benign at present, assisting the welcome decline in both arrears and repossessions, supported by effective lender practices.
But at some future point, interest rates will rise, and that this will put increased pressure on some household finances.
CML director general Paul Smee commented: “The relatively low rate of repossession among owner-occupiers – around one in 600 mortgages last year – should help to reassure borrowers that, if they do face payment difficulties, lenders will work with them to try to resolve their problems. Repossession is only ever a last resort.
“No-one should be lulled into a false sense of security that the current low interest rates we are experiencing will last forever, though. Rules are in place to ensure lenders assess future affordability, but these are not a substitute for careful borrowing. It’s essential for borrowers themselves to have one eye on the future. Think through any borrowing taken on now to ensure it will still be affordable if and when rates rise.”