Mortgage arrears and possessions continued to fall in the second quarter of 2014
Latest figures published today show the number of homeowners and landlords failing to pay their mortgage repayments fall to an eight year low. The continued fall in the numbers of homes being reprocessed or falling into arrears could be in part to a decline in unemployment numbers and the fact that the Bank of England has kept interest rates at a record low of 0.5%.
The Council of Mortgage Lenders (CML) has announced today, 14th August 2014, that data shows the number of mortgages in arrears across all bands is now at its lowest since the first quarter of 2008.
The number of mortgages in arrears of 2.5% or more of the balance stood at 131,400 (1.18% of all mortgages) at the end of June, down from 138,200 (1.24%) three months earlier and 154,900 (1.38%) a year ago.
A total of 5,400 properties (representing 0.05% of all loans) were taken into possession in the second quarter, down from 6,400 in the preceding quarter and 7,600 a year ago. At 11,800, the number of cases of possession in the first half of this year was at its lowest since the second half of 2006.
The totals reported today include arrears and possessions in the buy-to-let sector, which also continued to decline. The number of buy-to-let mortgages in arrears of three months or more (including cases in which a receiver of rent had been appointed) stood at 13,400 at the end of June, down from 14,700 three months earlier and 17,900 a year ago. In the second quarter, 1,300 buy-to-let properties were taken into possession, compared to 1,400 in the previous quarter and a year ago.
Commenting on the data, CML director general Paul Smee said: “Another fall in arrears and possessions is clearly welcome and shows that borrowers, lenders and money advisers are generally continuing to work well to contain payment problems where they arise, helped by an improving economy and low interest rates. But rates will rise at some stage, of course, and borrowers should be planning for that now.
Mr Smee continued: “We welcome the message from the Bank of England that, when it raises rates, it plans to do so in a series of ‘baby steps’, matched to a careful assessment of the ability of households to deal with higher borrowing costs. Any borrower anticipating payment problems should talk to their lender as soon as possible. Today’s figures continue to show that in many cases it is possible to work through a period of difficulty, with lenders committed to helping borrowers get their finances back on track.”
The latest data is broadly in line with CML forecasts of 135,000 mortgages in arrears at the end of 2014 (down from 150,000) and 25,000 cases of possession in the year (down from 28,000).
Even though these latest figures are welcomed the worry is that this downward trend could go into a sharp increase when the Bank of England raises interest rates. With a general election in May 2015 I cannot see interest rates increasing any time soon.