CML news & views

There was a welcome downturn in mortgage arrears and possessions in the first three months of this year. But with many households only just coping with their bills and therefore vulnerable to any financial shocks, there can be no cause for complacency about mortgage payment problems.

Although the numbers we reported earlier this month were lower than expected, we remain cautious about revising our forecast for 2010 downwards at this stage, given the significant continuing uncertainty about the economy. But if current levels of government support are maintained, interest rates do not rise and there are no new economic shocks, we accept that our prediction of 53,000 homes taken into possession this year now looks pessimistic. We may therefore be able to revise downwards our forecast later in the summer.

We understand the pressures on public finances that the new government faces, but strongly emphasise the need for continuing state support for home-owners facing financial difficulty. We hope the new chancellor will make a clear commitment in his first Budget in June to continue to provide support at current levels beyond the end of this year.

Lenders have worked hard to help borrowers and will continue to do so, but low interest rates and the package of government support measures are making an important contribution. However, households – and the wider housing market – have yet to feel the effects of the fiscal tightening that will begin in the June Budget.

Our data showed that the number of properties taken into possession in the first three months of this year totalled 9,800, down from 10,600 in the previous quarter and 13,200 in the first quarter of 2009. 

The number of mortgages in arrears also fell. At the end of March, 186,300 loans were in arrears of more than 2.5% of the mortgage balance, compared with 196,400 at the end of last year and 206,800 at the end of March 2009.

However, the reduction was more marked for those in lower arrears bands than for borrowers with larger mortgage debts. That suggests that low interest rates and better-than-expected levels of employment are helping prevent new households falling into difficulty. But many households with larger amounts of outstanding debt appear to be struggling to recover their financial position and re-pay arrears. Overhanging debt will require careful management – with a key role for the government – over an extended period.