CML report on repossessions and arrears show stable picture

The CML has today released figures on repossessions and arrears over the first quarter of 2012.  The number of repossessions was 9,600.  This is the same as recorded in the first quarter of 2011, and stops the upward trend which had been seen in recent years.  
The number of repossessions was higher than the last quarter of 2011, when 8,700 were recorded.  However, this is a normal seasonal pattern and the CML statistics suggest that repossession levels are stable.  
The number of mortgages in arrears fell over the first quarter of the year.  The number of mortgages with arrears over 2.5% of the outstanding balance dropped to 157,800.  This is 1.4% of all loans.  This is a fall from 160,300 at the end of December 2011.  
The largest improvements were in the middle arrears bands.  The number of loans in the 5 — 7.5% arrears band fell by 12% compared to last year.  It reached its lowest number since quarter 4 of 2008.  Only the number of loans in arrears by 10% or more showed a yearly increase. 28,000 loans were in this category, 300 higher than a year earlier.  This is the highest number since June 2000.

Although the figures are predominantly optimistic, the CML notes that continuing pressures on household finances, changes to welfare benefits, and an upward drift in mortgage rates all have the potential to disrupt the current stable picture.

Peter Gammon, director of Move with Us comments on today’s figures from The Council of Mortgage Lenders and what this means for the UK housing market:

“The continuing pressures on the UK economy are hitting household finances hard but it’s a welcome sign that we haven’t seen an increase in repossessions to reflect the worsening economic situation. Lenders have been more accommodating of borrowers struggling with repayments and we expect the Council of Mortgage Lenders projection of 45,000 repossessions in 2012 to remain on track. 

“While the prospect of 45,000 repossessions in 2012 is dire, it is important to remember that this figure is still considerably lower than it was in 2009, and remains far lower than the downturn we saw in the 1990s. 

“In the next six months we will see many lenders seeking to bolster their balance sheets and follow the Halifax and others’ lead that have recently taken the controversial step of increasing their variable mortgage rates. We expect that we will see the effects of this in both buy-to-let and mainstream lending which could potentially lead to an increase in repossessions in these areas over the next quarter.”

Mark Blackwell, managing director of xit2, the property and mortgage data specialist, said: “Mortgage lenders are being unsustainably tolerant of borrowers in arrears. Unemployment is increasing, and personal finances are being squeezed by the rising cost of living, which suggests repossessions should be higher, but they are being kept artificially low by lenders generous forbearance packages. Their generosity is camouflaging serious problems in borrower finances. 

Repossessions orders flowing through our systems in April fell 12.5% from the Q1 average, suggesting lenders are becoming even more tolerant of borrowers in long-term arrears — at least for the time being. But they can’t go on doing it forever. Banks funding costs are increasing and their balance sheets are being stretched, so there will come a point where can no longer afford to support borrowers in serious arrears. With the economy stalling, and the crisis in the eurozone worsening, that point may well come later in the year. We could see swathes of borrowers in long term arrears pushed over the edge once lenders turn off the forbearance packages that are acting as life support machines for borrower finances.” 

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