Repossessions hit lowest level for four years

Repossessions fell to their lowest level since 2007 last year, according to the latest figures from the Council of Mortgage Lenders (CML).

Some 36,200 properties were repossessed by first-charge mortgage lenders in 2011, marginally down from the 37,100 homes that were seized in the previous year. The CML had forecast that 40,000 homeowners would lose their properties in 2011.

Despite the fall, the data means that nearly 100 families are being evicted from their homes every day. The lenders’ trade association said record low interest rates and forbearance from mortgage lenders had helped keep people in their homes, but warned that repossessions are likely to rise in 2012 as the economic outlook worsens.

Some lenders have been reducing rates on a temporary basis or moving struggling borrowers to interest-only mortgages in an effort to keep people in their homes. The CML warned that although banks have been accommodating to those seriously behind with their mortgage payments to date, forbearance cannot go on forever.

In the three months to the end of December, the number of repossessions fell to 8,500 – nearly 9% down from the 9,300 recorded in the third quarter of 2011, but 5% up year-on-year. In terms of arrears levels, 159,400 mortgage holders had arrears equivalent to 2.5% or more of the mortgage balance, 7.5% down from the 172,400 recorded at the end of 2010.

CML director general Paul Smee said: “Low interest rates and good arrears management by lenders are helping the vast majority of those borrowers who face difficulties to keep their homes and get back on track. This will continue, but in the face of wider economic difficulties and rising unemployment, we are concerned that there will be a higher number of people facing more serious problems in 2012.”

“Anyone worried about their finances should talk to their mortgage lender and take advice on their other debts as soon as possible. This will give them the best possible chance of staying in their home even if they have a spell of financial difficulty. Forbearance cannot be indefinite; but for most households arrears are temporary and can be resolved.”

The CML predicts that rising unemployment and continuing pressures on household finances will result in around 45,000 repossessions and around 180,000 mortgages in arrears of 2.5% or more by the end of 2012.

Mark Blackwell, managing director of mortgage data specialists xit2, warned that mortgage holders currently being shown forbearance by their lenders could be in for a rude awakening when lenders look to tighten their balance sheets: “The headline figure may be positive, but it masks serious underlying problems in borrower finances. Repossessions are only being kept low by lenders’ generous forbearance policies, which they can’t afford to sustain in the long term.”

“These policies are a life support machine for many borrowers whose finances are in a torrid state. Lenders will be forced to switch a number of these life support machines off as they try to protect their balance sheets, and we are sure to see repossessions soar.”

“There is a block of 30,000 borrowers in serious long term arrears – it will only take a small downturn in the economy, or a gentle rise in the base rate, to push them over the edge and into repossession.”

source: Totally Money

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