Repossessions lower than expected

Mortgage arrears and repossessions have nudged downwards in the second quarter of 2012, according to the Council of Mortgage Lenders.

At 8,500, the number of possessions in the three months to June was the lowest since the final quarter of 2010 and down from 9,600 in the first three months of 2012. This is in line with a seasonal pattern seen in each of the last three years.

The number of mortgages in arrears remained broadly flat in the second quarter. At the end of June, the number of loans with arrears of 2.5% or more of the outstanding balance stood at 157,400, fractionally lower than the total of 157,800 at the end of the first quarter.

Levels of arrears in lower and middle bands were slightly lower than in the preceding three months but there was a small increase (from 28,000 to 28,300) in those mortgages with the highest levels arrears, of more than 10% of the balance.

The data show the number of possessions totalled 18,100 in the first six months of 2012, implying that possessions so far are on a lower trajectory than the CML’s forecast of 45,000 for the year as a whole.

But the CML said the Bank of England’s forecast for no growth in the economy is a reminder of the pressures that may disturb the current pattern of stability.

The CML's director general Paul Smee commented: "The figures show that lenders, borrowers and debt advisers are working together to get through the current period of economic difficulty and keep mortgage possessions in check.

“Generally, when borrowers prioritise their mortgage commitments, lenders can provide help appropriate to their individual circumstances. But success in managing temporary payment problems depends on everyone working together, and it is essential for anyone worried about their mortgage to talk to their lender as soon as possible."

Richard Sexton, director of e.surv chartered surveyors, said: “Banks are acting as a life-support machine for a big block of borrowers in long-term arrears. That’s why long-term arrears have increased yet repossessions have fallen.

“To banks’ credit they’ve done everything they can to keep people in their homes, but now the economy is slipping downhill they’ll be forced to switch those life-support machines off.

“We’ll soon reach a tipping point where the market will be hit by a glut of repossessions once decide they can no longer afford to sustain all of these 28,000 struggling borrowers.

Sexton also said the north-south divide is widening. He commented: “The M62 corridor, Lancashire and parts of East London have seen the highest number of repossessions since the financial crisis.

“A prominent north-south divide has emerged, which threatens to open up further now the economy is contracting. With local economies in the north declining faster than in the south, proportionally more northern borrowers have struggled to keep up with their mortgage repayments, which means banks will be forced to repossess even more homes in northern regions.”