Repossessions down to lowest since 2007 but serious arrears increase

14th February 2013

The Council of Mortgage Lenders has hailed the fall in repossessions to the lowest level since 2007 but one critic says that with rising ‘serious arrears’ there will have to be a reckoning one day.

In the third quarter of last year, there were 8,200 repossessions down from 8,500 in the second quarter and lower than the 9,600 for the third quarter of 2011.

The CML report shows the number of households experiencing mortgage arrears also fell. A total of 157,900 households ended 2012 with arrears of 2.5 per cent or more of the mortgage balance, compared with 161,400 households at the end of 2011 (and 216,400 at the peak of the current arrears cycle at the end of the first half of 2009). This maintains the arrears rate at 1.4 per cent, the same rate for the second consecutive year.

However, while the number of households in lower arrears bands has fallen fairly consistently since 2007, the number of cases in the highest band (arrears of more than 10 per cent of the mortgage balance) increased slightly from 28,200 at the end of 2011 to 28,900 at the end of 2012.

The Council of Mortgage Lenders director general Paul Smee, talking to the BBC, said: “Our figures show that good communications and effective arrears managements by borrowers, lenders and money advisers are helping the vast majority of those with mortgage repayment problems. The rate of repossessions has continued to fall and it is clear that lenders want to keep people in their homes.”

However Richard Sexton, director of e.surv chartered surveyors has warned that the number of borrowers in serious arrears could spell problems in future.

He said: “Falling repossessions levels are a bellweather of an improving economy. Lenders are growing in confidence, and feel they have the capacity to support a modest growth in arrears cases, which is music to the ears of borrowers in dire financial straits. But in the long-term it’s an unsustainable strategy. If the number of borrowers in serious arrears continues to increase, which it has done for the last ten consecutive quarters, lenders will eventually have to pull the plug.

“They are taking the hopeful position that borrower finances improve and arrears levels drop in the long-term. If they don’t, repossessions levels will have to increase further down the line. The imbalance between falling repossessions and increasing arrears has been growing since the financial crisis: since the end of 2008 repossessions have fallen 31 per cent but the number of borrowers in serious arrears has increased 18 per cent. That trend can’t last forever.”

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