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Arrears and possessions continue to fall


Published: 21 November 2013 | Author: Bernard Clarke

Data we released earlier this month shows that mortgage arrears are still falling, as borrowers continue to prioritise loan repayments and work closely with lenders to address payment problems as they arise.

Our data showed that, in the third quarter of this year, both the number and proportion of borrowers who are behind with their payments fell in all arrears bands.

A total of 149,400 mortgages, or 1.33% of outstanding loans, had arrears of 2.5% or more at the end of the third quarter. That was lower than the 154,900 at the end of June, and 159,100 at the end of the third quarter of 2012.

Arrears on mortgages, by percentage of total balance in arrears

Chart 1 - 14.11.2013 - arrears on mortgages by percentage of total balance in arrears

Source: CML Research

It now looks very likely that we will end the year with fewer than the 160,000 mortgages in arrears of at least 2.5% of the balance than we originally predicted. We will be updating our views on the levels of mortgage arrears and possessions at the end of this year, and what we expect in 2014, when we publish our updated forecasts in December.

The number of properties taken into possession by lenders also fell in the third quarter. The three-month total of 7,200 was the lowest since we began publishing quarterly data at the beginning of 2008, and was down from 7,600 in the preceding three months and from 8,200 in the third quarter of last year. The decline means that the proportion of homes taken into possession edged down from 0.07% to 0.06%.

Our data shows that lenders have taken 22,800 properties into possession in the first nine months of 2013, meaning that the total for the whole year also looks likely to be considerably lower than the 35,000 we originally forecast.

Our figures include arrears and possessions for both residential and buy-to-let borrowers. The arrears rate among buy-to-let landlords is lower than in the residential market, with buy-to-let mortgages accounting for 13% of total mortgages outstanding but only 9% of those in arrears.

But the proportion of homes taken into possession in the buy-to-let sector (0.1%) is higher than for residential borrowers (0.06%). Of the 7,200 homes taken into possession during the quarter, 1,500 were in the buy-to-let sector.

While welcoming the decline in arrears and possessions, we urge borrowers to continue to work closely with lenders to address problems where they do arise. As ever, any individual borrower anticipating a problem in making his or her payments should talk to their lender as soon as possible. By doing so, most are able to resolve temporary problems and avoid the lender seeking possession, which remains the last option.

It also makes sense for borrowers to think ahead at this stage about how they will manage their finances to cope with higher mortgage payments, as and when interest rates begin to rise in the future.

We are also sorry to see the closure of applications to the government’s mortgage rescue scheme in the English regions from the end of March next year. Although the 5,000 households helped directly through the scheme may seem a relatively small number, the benefit to them individually has been huge.

And, over and above the mortgage rescue option the scheme provided, it encouraged borrowers to talk to their lender about payment problems and to seek free independent debt advice. Despite the closure of the scheme, lenders remain committed to helping borrowers as much as possible to manage arrears problems and get back on track.