Real estate repossessions in the UK much lower than expected but experts warn rising interest rates

The latest figures from the Council of Mortgage Lenders (CML) show that lenders seized 9,400 properties in the April to June period, 400 less than in the first quarter of the year.
 
But experts are pointing out that much of this may be due to historically low interest rates which are keeping monthly mortgage repayments down.
 
The CML said it has once again revised its forecast for 2010 repossessions, expecting a total of 39,000 repossessions for the year, compared with its previous estimate of 53,000.
 
Its report also shows that the number of mortgages in arrears also dropped, by 5% during the second quarter. At the end of June there were 178,200 loans with arrears equivalent to 2.5% or more of their mortgage balance. This is a 17% fall on the same period a year earlier.
 
‘Mortgage difficulties have so far been contained at lower levels than we expected at the start of the year and by comparison to the 1990s recession,’ said CML director general Michael Coogan.
 
However he acknowledges that low interest rates are playing a part in preventing a repossession crisis. ‘The safety net for borrowers is weakened by the prospect of higher interest rates, a possible rise in unemployment, a counter productive stigma hanging over mortgage payment protection insurance, uncertainty over future debt advice funding, reduced government support for mortgage payments, and mortgage rescue schemes being reviewed as part of the deficit reduction plan,’ he said.
 
‘While we don't want to cry wolf, it seems obvious that the ongoing prognosis for arrears and possessions is far from a healthy all clear. We hope the coalition government will not risk undermining the chances of extending the welcome trends this year by removing support mechanisms that work,’ Coogan added.
 
Alison Beech, business relationship director at Spicerhaart believes that low interest rates and lender forbearance are masking the true situation. ‘If interest rates were not at their abnormally low level many more people would be falling behind with mortgage payments, with the inevitable resulting increase in repossessions,’ she said.
 
‘This week’s drop in unemployment is similarly welcome news on the surface, but is probably unsustainable. As the coalition government rips into public sector spending it is highly likely that there will be an increase in the number of people on reduced incomes, unable to sustain their mortgage payments. Even more worrying is the uncertainty over whether debt advice support and mortgage support schemes will also be victims of these spending cuts.  This, along with the rise in VAT in January and the likelihood of interest rates increasing before the end of the year, could mean we are yet to see a sharp rise in arrears and possessions,’ she warned.
 
Citizens Advice said the level of repossessions is still worrying, describing the situation a ‘the calm before the storm’.