Low interest rates help keep repossessions in check

Posted on August 11th, 2011 | Categories - Mortgages

The Council of Mortgage Lenders (CML) believes that low interest rates have kept the number of repossessions and people suffering from mortgage arrears low.

In the second quarter of 2011 a total of 9,000 homes were repossessed, 100 less than the previous quarter.

36,300 people were repossessed in 2010, but the CML still believe that 40,000 will suffer the same fate in 2011 rising to 45,000 in 2012.

Paul Smee, director general of the CML said: “Despite current uncertainty in financial markets, we see no need to revise our forecasts. Anyone with debt worries should take advice and speak to their lender at the earliest opportunity, as most temporary financial problems can be resolved.”

Low mortgage rates

The Bank of England has left base rate unchanged at 0.5% for 29 consecutive months, and the Governor, Mervyn King, yesterday indicated that rates are unlikely to rise in the short term.

Low interest rates, especially for those with Tracker mortgage or deals linked to the their lender’s variable rate have helped people meet their monthly repayments at a time when they may have otherwise struggled due to the rising cost of living or periods of unemployment.

The willingness of banks to help people with mortgage arrears may also be a contributing factor to the plateauing of repossessions.

Arrears

The number of mortgages with arrears of between 1.5% and 2.5% was slightly higher in the second quarter of the year compared to the first three months of 2011. In the second quarter 78,500 mortgages had arrears compared to 77,800 in the previous quarter.

The number of mortgages with larger arrears, of more than 2.5% of the outstanding balance, actually fell slightly from 164,500 to 166,700.

Paul Smee, again: “Mortgage repayment problems have stabilised against a current backdrop of stable employment and low interest rates.”

Anyone with mortgage arrears is advised to speak to their lender at the earliest opportunity, Housing Minister Grant Shapps said: “The worst thing anyone struggling to pay their mortgage can do is bury their heads in the sand hoping the problem will go away. No one in financial difficulty should be embarrassed to seek help if they need it.”

Buy to let mortgages

The CML also released figures which show that arrears amongst buy to let borrowers had fallen below those in owner occupied sector for the first time since 2008. The number of buy to let mortgages in arrears has fallen to 1.57% from a high of 3% at the start of 2009.

Interestingly demand for buy to let mortgages is still rising with the total number now at 1,342,200 up 29,000 in the second quarter of 2011. Buy to let mortgages now make up 12.4% of the UK mortgage market, the highest level for over 10 years.

Many people have feared that first time buyers would be pushed out of the mortgage market by buy to let investors, however Mr Smee of the CML does not believe that to be the case, saying: “If you consider the buy-to-let recovery alongside the increase in first-time buyer numbers, it appears that first-time buyers are not being displaced by buy-to-let landlords but are holding their own in a restricted market”