Low interest rate curbs mortgage reposessions

The number of people losing their homes because they cannot afford mortgages has fallen by 28 per cent since 2009

By Sarah Arnott
Sunday 23 October 2011 08:44

Home repossessions are dropping and the number of mortgages in arrears has stabilised as homeowners continue to feel the benefit of interest rates held at an all-time low, the Council of Mortgage Lenders (CML) said yesterday.

Repossessions fell by 7 per cent in the first half of the year, with 18,100 houses taken back by mortgage holders from owners behind on payments, according to CML statistics that offer a rare bright spot in the recent procession of gloomy economic data.

The number of people losing their homes because they cannot afford their mortgages was 28 per cent lower than over the same period of 2009.

The trend also continues to show improvement, with 9,000 repossessions between April and June, compared with 9,100 in the first three months of the year.

Overall, the number of mortgages in arrears is holding steady, the CML said.

The number of mortgages owing more than 2.5 per cent dipped slightly – from 166,700 to 164,500 – while those in arrears of between 1.5 per cent and 2.5 per cent rose from 77,800 to 78,500, as mortgage holders paid down outstanding debts, helped by interest rates that have now been held at 0.5 per cent for more than two years.

Taken together, mortgage repayment problems are evening out, with the help of stable employment and low interest rates, Paul Smee, the director general of the CML, said.

"Despite current uncertainty in financial markets, we see no need to revise our forecasts," Mr Smee said, restating CML expectations of a 0.35 per cent repossession rate over 2011 as a whole, rising to 0.4 per cent next year.

"It is clear from the low rate ofrepossession that lenders do want to keep people in their homes, and are successfully doing so in the vastmajority of arrears cases," Mr Smee said. "Repossession really is seen as a last resort."

The CML data is a ray of sunshine from the housing sector after months of doom and gloom about stagnant sales activity and falling prices. The most recent survey from the Royal Institute of Chartered Surveyors, published earlier this week, reported sales at the lowest level since the summer of 2009 as more than a fifth of respondents reported sliding prices.

Despite falling property price tags, the number of first-time buyers has dropped by nearly 10 per cent in the last two years, as borrowers struggle to find finance.

According to property website Rightmove, first-time buyers dropped to 23 per cent in the second quarter, compared with the 40 per cent expected in a healthy housing market.

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