From 1st July the Council of Mortgage Lenders is integrated into a new trade association, UK Finance. For the time being, all UKF mortgage information will continue to be published on this website, and UKF member-only mortgage information will only be available here.

UK Finance represents around 300 firms in the UK providing credit, banking, markets and payment-related services. The new organisation takes on most of the activities previously carried out by the Asset Based Finance Association, the British Bankers’ Association, the Council of Mortgage Lenders, Financial Fraud Action UK, Payments UK and the UK Cards Association. Please go to www.ukfinance.org.uk for wider content and updates from UK Finance.

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Support needed to keep arrears and possessions in check

News

Published: 15 February 2011 | Author: Bernard Clarke

Data we published last week showed there were 36,300 cases of mortgage possession in 2010, almost exactly in line with our revised forecast for the year. The total was 24% lower than in the preceding year, and accounted for just 0.3% of all mortgages.

The number of mortgages ending last year with arrears of 2.5% or more of the outstanding balance totalled 169,600 (1.49% of all loans), 13% fewer than at the end of last year. Data we published for the last three months of 2010 showed the fifth consecutive quarterly decline in possessions, with arrears at their lowed level since the third quarter of 2008.

Overall, the data were broadly in line with our most recent forecasts for 2010 to end with a total of 175,000 cases of arrears and 36,000 possessions. This year, we continue to expect a total of 40,000 cases of possession, with 180,000 mortgages ending 2011 with arrears of 2.5% or more of the outstanding balance.

As we go through this year, the number of people facing payment problems may increase if interest rates rise, and as a result of spending cuts that reduce the level of public support available.

Already this week, the government has announced that, under the mortgage to rent element of the mortgage rescue scheme, it is proposing to reduce the redemption price offered by the provider to the household from 97% to 90% of the market value. That means that, for the majority of cases where the outstanding mortgage is greater than 90% of the value, this will reduce the mortgage repayment received by the lender.

This latest cut in support follows the government’s decision last October to reduce the rate at which support for mortgage interest is paid from 6.08% to 3.63%.

Meanwhile, lenders are continuing to work hard with borrowers who face temporary difficulty. Anyone who is worried about being unable to pay their mortgage should contact their lender and seek advice at an early stage from Citizens Advice, Shelter, National Debtline or other advice agencies. That helps prevent problems escalating and becoming more difficult to solve.

As the recent data shows, possession is the last resort. Most people’s payment problems can be managed and controlled for a period until their circumstances improve.