The number of mortgage possessions fell again in the third quarter of 2012, according to data released today by the Council of Mortgage Lenders.
A total of 8,200 properties were taken into possession in the third quarter, down from 8,500 in the second quarter and 9,600 at the same time last year. This marked the lowest number of properties taken into possession in a single quarter since 2007.
Number of properties taken into possession
Source: CML Research
The number of mortgages in arrears remained stable in the third quarter. At the end of September, the total number of mortgages with arrears of 2.5% or more of the outstanding balance rose slightly to 159,100, up from 158,700 in the previous quarter but still down on the 165,300 in arrears in the same period last year.
Levels of arrears in the lower and middle bands remained consistent with the previous three months but there was a small increase (from 28,600 to 29,000) in those mortgages with the highest levels of arrears – more than 10% of the balance.
Number of mortgages in arrears
Source: CML Research
A total of 26,300 properties were taken into possession in the first three quarters of 2012, 8% fewer than in the first three quarters of last year. While the repossession rate equated to 0.13% in the buy-to-let sector, the rate was just 0.06% in the owner-occupier sector – resulting in an overall repossession rate of 0.07% in the quarter.
In the buy-to-let sector, repossession is only likely to occur at the end of an agreed tenancy, when the landlord is in arrears. In the owner-occupier sector, repossession is a last resort and the low rate of repossession reflects significant lender forbearance.
Commenting on today’s data, the CML director general Paul Smee said:
“Our figures show that good communication and effective arrears management by borrowers, lenders and money advisers are helping the vast majority of those with mortgage repayment problems. The rate of repossession has continued to fall and it’s clear that lenders want to keep people in their homes.
“Repossession really is a last resort but it’s essential for anyone worried about their mortgage to talk to their lender as soon as possible – it is more difficult to resolve problems when they are not tackled early.”
Nick Hopkinson, Director of property company, PPR Estates said:
“The major banks and mortgage lenders are still struggling to hide the real extent of their greedy and reckless lending prior to 2008 by showing previously unheard of levels of forbearance towards struggling borrowers in arrears. They are desperately trying to keep people in their houses. This is not being done to help borrowers but simply to protect previous bonuses and share prices by avoiding having to revalue their entire loan books as a result of the actual sales prices they would achieve on repossessed stocks. The number of homeowners in arrears continues to rise, even after over three years of the lowest interest rates in history. It is difficult to see how allowing these borrowers to fall further and further behind is really a help amidst the current economic uncertainty.
“Many tens of thousands of home borrowers are also trapped in a negative equity nightmare, even if they are keeping up with their mortgage payments, and are also unable to move home. This lack of mobility and house market liquidity is bad for the wider economy and is simply storing up bigger financial debts for borrowers and potentially bigger losses for the banks. Household incomes are going to continue to be squeezed as we go into 2013, with rising fuel costs and further austerity measures assured. Against this backdrop, it is almost inevitable that house prices will continue to drift downwards next year.”
Richard Sexton, director of e.surv chartered surveyors, commented:
“Banks are doing a great job of keeping struggling borrowers in their homes. Long-term arrears have risen yet repossessions are down, which is thanks to lenders’ generous forbearance policies. The issue is whether this is a sustainable approach in the long-term. This is the fourth quarter in a row where arrears of 10% or more have increased, yet repossessions have remained broadly flat. Banks won’t be able to go on absorbing long-term arrears into their balance sheets infinitely, and they also have a duty of care to ensure borrowers don’t build up ‘too much’ debt by allowing them to stay in a property if this is unsustainable.. So the market may well reach a tipping point where lenders can’t afford to carry on sustaining all these struggling borrowers. Longer term, the jury is also out as to whether the recently highlighted interest-only issue is a real one. Lenders are exposed to around £120 billion in outstanding interest-only mortgages with no specified repayment plan that are due to mature in the next 8 years, which suggests mortgage arrears will continue to increase well into the future and could impact on repossession levels up to 2020.”