Mortgage arrears and repossessions fall: Lenders warn against housing market euphoria, Maria Scott reports

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The Independent Online
HOME repossessions and mortgage arrears have declined, according to figures released yesterday. But the Council of Mortgage Lenders has warned against euphoria.

Nearly 32,000 homes were repossessed in the first half of this year, slightly fewer than in the second half of last year but still more than four times pre-recession levels, the CML said.

The Lord Chancellor's Department yesterday announced a drop in court orders for mortgage repossessions: 26,526 were made in England and Wales during the second quarter of this year, down from 26,910 in the first three months and a 20 per cent reduction on the second quarter of 1992.

And figures from the Building Societies Commission, the societies' regulatory authority, showed an improvement in mortgage arrears: at the end of the first quarter of this year, loans with arrears of more than 2.5 per cent of their value represented 10.6 per cent of building societies' total lending, against 11.1 per cent at the end of last year.

However, Adrian Coles, director general of the CML, whose members account for more than 80 per cent of mortgages in the United Kingdom, said that the level of repossessions remained a significant problem. 'There is absolutely no euphoria among lenders,' he said.

The CML statistics showed that there was still a serious backlog of long-term arrears. Nearly 350,000 borrowers were at least six months in arrears at the end of June and 158,000 were more than 12 months behind - a rise of nearly 7.5 per cent.

Many homeowners with such serious arrears will eventually lose their homes, but Mr Coles denied that lenders would rush to start repossessing homes if the market picked up. It was more likely that lenders would delay a repossession in the expectation of a better price for the property.

The CML figures showed that 31,780 homes were repossessed in the first half of this year, 1,010 fewer than in the second half of 1992. Repossessions were a record 38,930 in the second half of 1991, having risen from 7,310 in the first half of 1989.

Mr Coles said that the plight of homeowners had been eased greatly by cuts in mortgage rates, and that lenders would like to see another cut in rates. Every 1 per cent cut in the standard mortgage rate saved homeowners pounds 3.4bn a year, he said. The CML has calculated that the interest rate reductions since last September have meant a monthly saving of pounds 60 on a typical pounds 35,000 mortgage.

Mr Coles said that the Government's agreement to pay mortgage benefits for people on income support direct to lenders had also helped keep people in their homes.

However, Shelter, the housing charity, claimed yesterday that some lenders were still applying for repossession orders where borrowers had got into difficulties, even when mortgage payments were being covered by benefit payments.

Mortgage rescue schemes, page 33

----------------------------------------------------------------- Table: ANNUAL MORTGAGE ARREARS AND POSSESSIONS ----------------------------------------------------------------- Year No of mortgages Properties Mortgages Mortgages at end of taken into 6-12 months 12 months year possession in arrears in arrears 1989 9,125,000 8,500 66,800 13,840 1990 9,415,000 27,330 123,110 36,100 1991 9,815,000 38,930 183,610 91,740 1992 9,922,000 32,790 205,010 147,040 -----------------------------------------------------------------

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