Lenders expect they will repossess fewer homes

Interest rate cuts by the Bank of England will help distressed borrowers hang on to their homes, the Council of Mortgage Lenders said yesterday.

As the effects of radical rate reductions have fed through, at least in part, to mortgage borrrowers with tracker and some other deals, the CML has reduced its forecast for repossessions during this year from 75,000 to 65,000.

However that will still represent the highest level of repossession seen since 1992, in the middle of the last housing crash.

The forecast is in line with the latest figures from the Financial Services Authority, which said yesterday that 14,825 properties were taken over by banks and building societies during the first three months of the year, 62 per cent up on the same period in 2008.

The numbers facing arrears, but not yet the loss of their home, will run to about 360,000 during 2009, the CML forecast, some 15 per cent down on their previous estimate.

Despite rising unemployment and the further business failures, the CML said the reduction in interest rates and the various official schemes to help people stay in their homes, such as the Homeowner Mortgage Support scheme, under which people can defer up to 70 per cent of their interest for up to two years, and better access to legal advice is helping people stay in their homes.

The CML also expects a widening in borrowers' access to mortgage finance as the year wears on. It has revised its forecast of net mortgage lending to a net figure of minus £5bn, broadly the same as in 2008 and an improvement on the previously thought outturn of minus £25bn.

The housing charity Shelter called on ministers and lenders to prepare for a “second wave” of repossessions over the next two years. The charity said it had seen a 250 per cent increase in the number of calls to its free helpline regarding mortgage arrears over the last year.