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Figures show repossessions had less of an impact on real estate market than expected

Some 46,000 properties were repossessed, an increase of 6,000 on 2008 but less than the most recent forecast of 48,000, and significantly less than the 75,000 forecast at the beginning of 2009, the figures from The Council of Mortgage Lenders show.
 
In terms of payment difficulties, 188,300 mortgages ended the year with arrears equivalent to at least 2.5% of the outstanding mortgage balance, lower than the 195,000 the CML had anticipated, and 3% lower than at the end of the third quarter.
 
The CML said that some borrowers facing only modest difficulties are being helped by low interest rates to get back out of trouble, whereas those with more severe problems may be stabilising their arrears but not recovering from them, and lender forbearance is likely to be a significant factor keeping them in their homes.
 
Looking ahead, the CML’s current 2010 forecast of 205,000 arrears cases and 53,000 properties taken into possession may be a little pessimistic, given that unemployment is faring better than expected so far, and that low interest rates, lenders’ arrears management policies, and government assistance schemes are working well to support many borrowers through temporary difficulties.
 
However, the economic and political outlook remains uncertain, and interest rates are expected to rise sooner than later, experts warn.
 
The better than expected picture was due to low interest rates and a lot of effort by government and lenders to help borrowers, said CML director general Michael Coogan. But he warned that the repossession nightmare it not yet over.
   
‘2010 will still be a challenging year for many borrowers and some households will inevitably find their finances being squeezed if and when interest rates do eventually rise. But borrowers should feel reassured that lenders want to help them keep their homes wherever possible. The vast majority of people who get into arrears manage to keep their homes, and will do so even if interest rates rise. Seeking advice as soon as financial problems occur will help to minimise the risk of the situation getting out of control,’ he added.
 
According to Simon Rubinsohn, Royal Institution of Chartered Surveyors chief economist, interest rates remaining low will help the market in 2010.  ‘The fall out from the downturn in the housing market in terms of repossessions is proving relatively modest compared with the experience of the early 1990’s, a direct result of the low level of interest rates which has kept mortgage funding costs at historically low levels and thus limited the pain on homeowners during the recession,’ he said.
 
Housing Minister John Healey said that Government will keep help in place for struggling homeowners. The Government has tightened the rules so that repossession is always the last resort and more than 330,000 households have benefited from help and advice with their mortgage over the past year, he added.
 
And Ian Potter, operations manager of the Association of Residential Letting Agents, said that repossession would remain a threat in 2010. ‘We must not labour under illusions as the threat to the property market is ongoing and very real. Our research shows that rental arrears are at high levels and this is indicative that financial pressures on the public remain in place,’ he explained.
 

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