Home repossessions to rise warns CML

Posted on June 2nd, 2011 | Categories - Mortgages

Late or missed mortgage payments will result in a higher number of repossessions in 2012.

Although cases of mortgage arrears have dipped slightly they will rise again, according to experts.

Home repossessions are set to rise further as mortgage holders fall behind in their loan repayments, the Council of Mortgage Lenders has warned.

Figures for the first quarter of this year show that the number of repossessions rose to 9,100, up by 1,200 from the previous quarter. The CML has forecast that the statistics for the whole of the year will rise from 36,000, recorded in 2010, to 40,000.

The council report added that repossessions in 2011 are expected to rise by a further 5,000.

However, the number of home owners in arrears of 2.5% or more of their outstanding debt fell to 166,900 in the first three months of this year, which is down from the 170,000 recorded in the last quarter of 2010.

Michael Ossei, of price comparison website uSwitch.com, explained that the reduction may not last in the long term: “The drop in arrears is not likely to last much longer as we are facing a perfect storm that could cause many households at best to flounder and at worst on to the rocks…Unfortunately, when mortgage rates start to climb again the reality of stagnant salaries and rising costs will hit home and many households are going to be in dire straits”.

The CML also stated that the stringent lending criteria employed by many high street banks, which has prevented first-time buyers from getting on the property ladder, is predicted to remain until 2012 with this year’s sales expected to reach just 840,000.

The council said: “The aftermath of the global financial crisis continues to have a pronounced impact on mortgage and housing markets. Property transactions look set to remain at the low levels of the past few years. Lenders will continue to have only a modest risk appetite, and this will limit lending at high loan-to-value ratios”.

Michael Coogan, director general of the CML, said: “The financial position of many households is likely to be stretched for some while, and some will inevitably find themselves in difficulty. Lenders have a range of options to nurse borrowers through temporary problems, but will clearly need to be mindful of the regulator’s concern that too much forbearance may be as bad as too little”.