Beneath the headline figures, the CML quarterly data shows home owner mortgage arrears running at 1.03% of all loans at the end of 2015, with buy to let at a lower rate of 0.31%, continuing the recent trend of a lower prevalence of arrears in the buy to let market.
However, the picture is reversed on repossessions, with around one repossession per 2,500 mortgages in the buy to let market in the fourth quarter of the year, compared with one in 5,000 in the homeowner market.
Across the whole market, most had relatively modest levels of arrears at under 5% of the mortgage balance. The number of loans with arrears in the most severe band, representing 10% or more of the mortgage balance, was 23,700, down from 24,200 at the end of 2014.
The CML report says that the modest decline in the most serious arrears band may partly reflect distortions in the timing of possessions, but the overall arrears trend is clearly down.
At 10,200, the total number of repossessions in 2015 was less than half the number in 2014, down from 20,900 but the report says that caution is needed on the year on year comparison, because the timing of some possessions may have been affected by the aftermath of a court case which has been causing lenders to review their processes. However, it is likely that the underlying trend is still emphatically down.
‘It is good news that the levels of mortgage arrears and repossessions remain low and falling. But, at the risk of sounding as if we are crying wolf, we would continue to urge all borrowers to plan ahead for a time when the interest rate environment may be less benevolent. Lenders do not wish to see borrowers who are coping currently falling into difficulty if and when rates do eventually rise,’ said CML director general Paul Smee.
The figures are a sign of a period of relative stability for both owner occupiers and landlords when it comes to managing borrowing, according to Kevin Purvey, chairman of the Intermediary Mortgage Lenders Association (IMLA).
‘Lending volumes forecast to rise, the rigours of lenders’ affordability checks will help borrowers avoid a future scenario where they become overstretched. However, continuing delays to the Bank of England’s first rate rise should not breed complacency,’ he explained.
‘With mortgage rates at record lows, there is still plenty of reason for households to think ahead, weigh up their monthly balance sheet and consider remortgaging to help prepare for the inevitable rise. Changes to tax allowances will give landlords added incentive to look at their remortgage options in 2016,’ he pointed out.
‘Lender competition remains high, which means intermediaries will be at the heart of the continuing remortgaging revival as borrowers seek expert advice on the best option to suit their needs,’ he added.
Meanwhile, new figures released by the Finance and Leasing Association (FLA) show that the number of second charge mortgage repossessions was 228 in 2015, the lowest level for at least seven years. In the final quarter of 2015, the number of repossessions was 33, down 58.2% on the same quarter in 2014.
In 2015 the second charge mortgage market reported new business growth of 34% by value to £844 million, and 9% by volume to 20,647, the fourth consecutive year of growth.
The data also shows that although new business was at its highest annual level since 2008, it remains significantly lower than pre-crisis levels, when it peaked at over £5 billion by value and 200,000 by volume.
‘Repossessions fell by 49% in 2015 as a whole, as second charge mortgage providers continue to do everything possible to help customers who are struggling with their finances,’ said Fiona Hoyle, head of consumer and mortgage finance at the FLA.
‘Second charge lenders are putting the finishing touches to systems changes, as they prepare to implement the Mortgage Credit Directive and MCOB ahead of the 21 March 2016 deadline. A huge amount of work has been completed to extremely challenging deadlines,’ she added.
