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UK property repossessions decreased in 2011, the latest figures show

For the fourth quarter of 2011 the number of repossessions was 8,500, nearly 9% down from 9,300 in the third quarter, but 5% up from 8,100 in the fourth quarter of 2010.

On arrears, there continued to be a modest improvement across all arrears bands  in the fourth quarter, and in 2011 as a whole compared with the previous year. At the end of 2011, 159,400 mortgages had arrears equivalent to 2.5% or more of the mortgage balance, 7.5% down from 172,400 at the end of 2010.

Buy to let properties accounted for 5,900 of the repossessions in 2011, up from 4,700 in 2010. The overall repossession rate was 0.32% in 2011, 0.31% on owner occupied properties and 0.42% on buy to let. This compares with an overall rate of 0.33% in 2010 which was made up of 0.32% on owner occupied properties and 0.36% on buy to let.

The CML said that higher repossession rate on buy to let is not reflected in the arrears experience, however, with the buy to let sector experiencing a lower level of arrears than the owner occupier sector.

While the three months arrears rate stood at 1.98% of all mortgages at the end of 2011, the proportion was higher among owner occupiers at 2.06% than among buy to let mortgage holders, some 1.38% if receiver of rent cases were excluded and 1.79% if included.

Although arrears and repossessions throughout 2011 were fairly stable, the CML has no current plans to revise its current 2012 forecasts for the year. Worsening unemployment and continuing pressures on the cost of living seem likely to result in some further deterioration in the position of households in 2012.
The CML anticipates that this is likely to result in around 45,000 repossessions and around 180,000 mortgages in arrears of 2.5% or more by the end of the year.

‘Low interest rates and good arrears management by lenders are helping the vast majority of those borrowers who face difficulties to keep their homes and get back on track. This will continue, but in the face of wider economic difficulties and rising unemployment, we are concerned that there will be a higher number of people facing more serious problems in 2012,’ said CML director general Paul Smee.

‘Anyone worried about their finances should talk to their mortgage lender and take advice on their other debts as soon as possible. This will give them the best possible chance of staying in their home even if they have a spell of financial difficulty. Forbearance cannot be indefinite; but for most households arrears are temporary and can be resolved,’ he added.

Meanwhile, separate figures from the Finance & Leasing Association (FLA), the trade body for the second charge mortgage market, shows that in 2011 second charge mortgage lenders repossessed 827 properties, 4.3% down on 2010's total.

The number of second charge mortgage repossessions rose by 11.3% in the final quarter of the year compared with the same period last year, with second charge mortgage providers taking 178 properties into their possession. But low levels of repossessions earlier in the year meant that the total for the year as a whole was down on 2010.

The FLA currently expects the number of repossessions in 2012 to be very slightly higher than in 2011.  ‘Repossession levels have fallen for the third consecutive year as lenders continue with forbearance measures aimed at helping customers in financial difficulty to remain in their homes. These measures have been shown to work, as total repossessions are 48.7% down in 2011 on the total in 2008,’ said Fiona Hoyle, head of consumer finance at the FLA.

‘Repossession remains the last resort if all other measures have failed. However, economic uncertainty persists and we may see this reflected in a slight rise in the number of repossessions in 2012,’ she added.

David Brown, commercial director of LSL Property Services, said that rock bottom interest rate has placed an artificial cap on repossessions, and has prevented the current squeeze on household budgets from feeding into a growing number of arrears cases.

‘However, with the UK’s economy in the doldrums and spending cuts beginning to take hold, arrears and repossessions are likely to rise as the year progresses. While we don’t forecast the increase in repossessions in 2012 to be as high as the 24% predicted by the CML, the country’s economic malaise and the weakening labour market will filter through into the repossessions market, and an increased number of borrowers will face severe mortgage payment problems,’ he explained.

‘Nevertheless, we don’t expect substantial spike in repossessions figures until the bank rate is hiked, and borrowers in financial difficulty face increased mortgage payments,’ he added.