Repossessions fall but homeowners are not out of the woods yet

10th February 2011

Recovery in the fragile housing market is looking more optimistic following a significant 24% drop in the number of homes taken back by banks and building societies last year, compared to 2009. 

Official data from the Council of Mortgage Lenders (CML) revealed that first charge lenders took back the keys to 36,300 homes in 2010, a figure that accounts for just 0.3% of all mortgages.

The number of homeowners battling off repossession, but who are in behind with their mortgage payments, also fell. At the end of last year, 169,600 mortgages were in arrears, which accounts for 1.49% of all loans, said the CML. This is drop of 13% on the same time in 2009.

David Birne, insolvency partner at HW Fisher & Company chartered accountants, said the figures were, ‘very encouraging given the challenges of the past three years'. But he added that the number of repossessions and borrowers in arrears could spike sharply when interest rates rise this year, as is widely predicted.

 "At present, a lot of households are stretched but they are surviving. However, even a percentage point rise in Bank Rate will send many people over the edge. So what happens when rates reach to 5% or more?"

Rate rise fears are coupled with government assistance for homeowners being cut back as part of its raft of austerity measures. For example, there has been a reduction in the rate at which Support for Mortgage Interest is paid, from 6.08% down to 3.63%.

The cash-rich are not deterred from property however. Separate data from the CML showed that the buy-to-let market grew by 7% in 2010. At the end of the year there were an estimated 1.3 million buy-to-let mortgages outstanding, which is 11.5% higher than the number in 2009.

CML director general Michael Coogan said that demand among property investors "seems to be resilient."

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