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Property repossession still rising but outlook now less gloomy

The latest figures from the CML shows that there were 12,800 repossessions by first-charge mortgage lenders in the first quarter of this year, compared with 10,400 in the fourth quarter of last year, and 8,500 in the first quarter of 2008.

The CML said it now thinks its 75,000 forecast looks pessimistic for the year as a whole, and expects to revise the figure downwards in its next housing market forecast update.

The number of mortgages in arrears continued to rise on all measures. However, the number of months measure is disproportionately affected by the very low interest rate environment at present, its report says, so it is more consistent to measure arrears as a percentage of the total outstanding mortgage balance.

The number of loans with arrears of more than 2.5% of the mortgage balance rose by 12% from 182,600 in the fourth quarter of 2008 to 205,300 in the first quarter of this year.

Normally, the CML urges a comparison of the rate of arrears and possessions as a proportion of the total stock of mortgages. However, in this quarter such a comparison is misleading because it is distorted by a significant change in the published total number of outstanding mortgages.

In the first quarter of 2009 around 500,000 'legacy loans' (those retaining only a nominal outstanding balance, for example for deed storage purposes) were newly excluded by reporting lenders from the total number of outstanding mortgages, in line with the CML's existing guidance notes. Combined with a genuine modest reduction in the number of outstanding mortgages, this has had the effect of bringing down the number of existing mortgages from around 11.7 million to around 11.1 million.

Unfortunately, it has not been possible to revise earlier estimates of the total stock on a consistent basis, the CML said.

'Despite technical issues this quarter affecting our ability to compare arrears and possession rates with earlier periods, it is clear that mortgage arrears continued to increase. So did repossessions, but not as much as our 75,000 forecast figure for the year would suggest. So our forecast now looks pessimistic and we expect to revise it over the next month or so,' said CML Director General Michael Coogan.