Repossessions and arrears still falling, reports CML
Published: 12 May 2016
The number of repossessions in the first quarter of 2016 was 2,100 (1,500 home-owner, 600 buy-to-let), meaning that the repossession rate is the lowest on record, according to the Council of Mortgage Lenders. If this rate continued through 2016, it would put the annual number of repossessions at 8,400, lower than any year since 1982 (but in 1982 there were only 6.9 million mortgages, against 11.1 million mortgages today).
Chart 1: Repossessions, buy-to-let and owner-occupied markets
Mortgage arrears also continued to fall. For the first time in more than a decade, the number of mortgages in arrears of 2.5% or more fell below the 100,000 mark, with 96,200 loans in arrears at the end of March, down from 101,700 at the end of December, and 111,200 at the end of the first quarter of 2015. Even the number of mortgages in the most serious arrears band of 10% or more, which has remained fairly static while the lower arrears bands have declined, fell a little this quarter.
Chart 2: Arrears on mortgages 2.5% or more of balance outstanding
It has been a notable trend in recent years that the decline in mortgage arrears and repossessions means that experience is much more positive than in the rented sector, where separate data from the Ministry of Justice, based on court activity, shows that eviction rates are much higher (especially in the social rented sector). For example, there were 42,728 rental evictions in England and Wales by county court bailiffs in 2015, against 5,594 mortgaged property repossessions by county court bailiffs, even though the rented sector accounts for only around a third of the housing stock.
Looking in more detail at the latest CML data, it is possible to look at experience in both the home-owner mortgage market and the buy-to-let market. As usual, arrears rates are higher among home-owners than buy-to-let landlords, but the repossession rate is lower. This is because lenders will seek to avoid repossession wherever possible to enable home-owners to get over temporary periods of difficulty, whereas buy-to-let is a more commercial enterprise and lenders may move to protect their position more quickly on rental properties as tenants move out.
Chart 3: Arrears by bands as a proportion of total arrears 2.5% or more of balance outstanding
Commenting on the new data, CML director general Paul Smee said:
We cannot completely avoid the risk of any individual household experiencing arrears or repossession. But lenders continue to work very effectively to help their borrowers through periods of difficulty when they do occur, and borrowers should be reassured that most cases of arrears can be resolved and will not lead to repossession. The key to dealing with difficulty is to tackle it early, and to communicate with your lender as soon as you think you may be facing problems.
Notes to editors
1. The Council of Mortgage Lenders' members are banks, building societies and other lenders who together undertake around 95% of all residential mortgage lending in the UK. There are 11.1 million mortgages in the UK, with loans worth over £1.3 trillion.
2. Due to a change in the methodology used to compile CML arrears and possessions data, to improve the quality of the results, there is a break in the data series between Q1 2014 and Q2 2014, but figures are directly comparable back to Q2 2014.
3. The current underlying trend for repossessions is one of continuing gentle downward movement. For technical reasons relating to lenders' processes, the number of repossessions over the past year has been showing an overstated reduction. This is expected to unwind progressively in 2016. Arrears numbers are unaffected.
4. CML arrears and repossessions figures are for the UK as a whole. No breakdown of data is available for the regions or for individual countries within the UK.
5. The Ministry of Justice's mortgage and landlord repossession statistics for the same period can be found on the gov.uk website. This includes Quarterly National Statistics on repossession claim actions in county courts by mortgage lenders and social and private landlords.
6. CML arrears and repossessions data for the second quarter of 2016 will be published on Thursday 11 August 2016.