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Property repossessions and mortgage arrears in UK fall in first quarter of 2010


The latest figures from the Council of Mortgage Lenders show that repossessions and mortgages entering arrears both fell in the first quarter of the year. However, the CML warned that this was no cause to complacency as a large number of households are ‘just coping’ and are vulnerable to any further shocks arising from the current economic uncertainty.
Repossessions fell from 10,600 in the previous quarter to 9,800 in the first three months of 2010. As a proportion of all mortgages, repossessions accounted for 0.09%. The total proportion of loans with arrears equivalent to 2.5% or more of the mortgage balance was 2.38%, down from 2.52% in the previous quarter. And the number of loans in arrears fell from 196,400 at the end of 2009 to 186,300.
‘With all eyes on the new government and what steps it will take to address the fiscal deficit, we cannot emphasise too strongly the importance of continuing to fund the support mechanisms that are proving effective in containing mortgage arrears and repossessions,’ said CML director general Michael Coogan.
‘The fall was more marked in the lower arrears bands than among those with more substantial arrears, where the reduction was only very modest. This suggests that low interest rates and relatively stable employment have been helping to prevent new households falling into difficulty, but that many households with more entrenched problems are still struggling to restore their financial position and repay arrears. This debt overhang will require careful management over an extended period,’ he explained.
‘We hope and expect to be able to revise down our 53,000 forecast for repossessions in 2010, but we are acutely conscious of the beneficial influence that low interest rates and the package of support have played so far. The dampening effects on households and the wider housing market that fiscal tightening is likely to exert are still to be felt, but it should be a key priority to support borrowers most in need and maintain funding for the government’s housing policies,’ he added.
The Royal Institution of Chartered Surveyors said it expects the number of repossessions in 2020 not to exceed 45,000. Chief economist Simon Rubinsohn said that a combination of low interest rates, early signs of economic recovery, an understanding attitude from lenders and the raft of measures introduced by the government have resulted in the decline in the number of repossessions.
‘Just as significant and welcome are the indications that this trend will continue to improve over the coming quarter. Claims issued, the initial stage of the repossession process, stood at just 18,500 which compares with a recent peak of almost 40,000 in the first quarter of 2008. There was also a further fall in the number of claims leading to an order. They are now barely 50% of where they were in the final three months of 2008,’ said Rubinsohn.
‘It is of course too soon to claim that the worst of the repossession news is now in the past. The prospect of a significant fiscal squeeze will take its toll on homeowners and it is improbable that interest rates can remain at 0.5% indefinitely. That said, the private sector is slowly gaining traction and should begin adding jobs over the coming year,’ he added.