The council of Mortgage Lenders (CML) yesterday said that Government support for vulnerable borrowers must be sustained through the new year, despite figures showing arrears and repossessions falling.
CML figures showed that 176,100 mortgages – just 1.55 per cent of the total – had arrears of 2.5 per cent or more of the outstanding balance at the end of September. That is down from 178,200 at the end of June, and from 203,800 a year earlier.
The figures are consistent with the CML's prediction of 175,000 mortgages in arrears at the end of the year, and lower than the original forecast of 205,000 cases. The industry body also reported better than expected news on possessions. Some 8,900 properties, representing 0.08 per cent of mortgages, were possessed in the third quarter of 2010. The total was 5 per cent lower than the 9,400 cases of possession in the previous three months, and is the fourth consecutive quarterly decline.
The number of properties taken into possession was 27 per cent lower than the 12,200 in the same period a year ago. In the first nine months of the year, there have been 28,400 cases of possession, which is trending below the CML's revised forecast of 39,000 for the year – and is significantly lower than the original forecast of 53,000 properties.
The council said that the figures showed "the benefits for many borrowers of co-ordinated efforts to help them, and to provide a better safety net of support than in the 1990s".
However, economists also point out that interest rates have been held at historic lows, which has meant that people hit by the downturn have found it easier to keep paying their mortgages than in earlier recessions when rates were much higher.
And the CML fears that with the economic outlook continuing to be uncertain at best, the withdrawal of support for distressed borrowers could create a crisis. "With the economic outlook uncertain... the CML believes support for borrowers in difficulty must be sustained throughout 2011 and beyond."
Michael Coogan, CML director general, added: "Despite the severity of the economic slowdown, and the likelihood of only a slow and protracted recovery, a combination of low interest rates and the commitment of borrowers, lenders, the Government and debt advisers has helped to keep mortgage payment problems in check so far. But we cannot take falling arrears and possessions for granted, and the recent welcome trend may reverse." Mr Coogan has called for more work on ways to support distressed borrowers in combination with debt charities and the Government.
The Financial Services Authority has voiced concern about the number of people struggling to pay mortgages, but who have not yet got into serious arrears. It is seeking to impose tough new rules on lending.
But the CML has warned that these rules could effectively ban hundreds of thousands of people from mortgages who would have been approved in recent years and who are meeting repayments. This could create severe problems in the housing market.Reuse content