The number of mortgages behind with payments also fell. At the end of June there were 178,200 loans with arrears equivalent to 2.5% or more of their mortgage balance, 5% lower than at the end of March and 17% lower than a year earlier.
The CML has revised its forecasts on arrears and possessions and now expects 175,000 mortgages to end the year 2.5% or more in arrears, compared with the previous forecast of 205,000.
A total of 39,000 repossessions is now forecast for 2010 as a whole, compared with the previous forecast of 53,000.
The headline arrears figure masks differences in the experience of different arrears bands. In the lowest arrears category between 1.5% and 2.5% of balance there has been a marked improvement from the peak in the first quarter of 2009, when 1% of all mortgages were in this category, to 0.7% now.
But in the highest 10% or more arrears category, the proportion of mortgages has remained almost static at 0.23% compared with the peak of 0.24%.
In the higher arrears categories, some mortgages will have improved, and returned to lower categories, while others will have worsened and followed through to repossession, and will in turn have been replaced by other mortgages flowing up from lower arrears bands where arrears are worsening.
The CML said higher bands are showing less of a decline suggesting that there is still a significant segment of borrowers whose arrears may have been stabilised through lender forbearance or other support, but whose situation is not improving enough to enable them to claw their way out of problems.
These finely-balanced arrears cases are the ones who may be at most risk of tipping into repossession if there are negative changes such as higher interest rates or reduced benefit support.
CML director general, Michael Coogan, said: "Mortgage difficulties have so far been contained at lower levels than we expected at the start of the year, and by comparison to the 1990s recession.
"However, the safety net for borrowers is weakened by the prospect of higher interest rates, a possible rise in unemployment, a counter-productive stigma hanging over mortgage payment protection insurance, uncertainty over future debt advice funding, reduced government support for mortgage payments, and mortgage rescue schemes being reviewed as part of the deficit reduction plan.
"While we don't want to cry wolf, it seems obvious that the ongoing prognosis for arrears and possessions is far from a healthy all-clear. We hope the coalition government will not risk undermining the chances of extending the welcome trends this year by removing support mechanisms that work."
Eric Stoclet, managing director of Crown Mortgage Management, said: “A decline in arrears and possession numbers is positive news, particularly given the current economic climate. However, despite the CML’s decision to revise down its forecasts for borrowers losing their homes in 2010, the outlook beyond 2010 is far from clear.
"Sustained low interest rates are playing a huge part in allowing homeowners to keep up with their monthly payments, but the Bank of England has conceded that inflation is likely to be well above its 2% target this year and into 2012. Should inflation turn out to be higher and more persistent than the BoE anticipates, an increase in the base rate may have to be made sooner than anticipated or desired. The potential for rising unemployment is also no secret, particularly in the public sector where the government is set to ramp up spending cuts, and this will see more borrowers struggling to meet their payments.
"The approach of many lenders and servicers in helping borrowers in financial difficulty as soon as problems arise and in treating possession as a last resort solution is important – in stark contrast to the housing crisis of the early 1990s. However, lenders and servicers need the tools to help struggling homeowners and it is crucial the government continues to provide support mechanisms – such as the Mortgage Rescue Scheme – to help stave off the threat of possession.”
Citizens Advice chief executive Gillian Guy, said: “While it is good news that numbers are down, is still worrying that 9,400 households have been repossessed and others are still struggling to meet their payments.
"The Citizens Advice service saw 25,360 mortgage arrears problems in the quarter from April to June 2010 and it is widely expected that this is the calm before the storm with the impact of public sector cuts still yet to come.
“Therefore it is crucial that further measures are put in place now in preparation.
"Both lender forbearance and the current package of policy measures have made a real impact to ensure people aren't losing their homes unnecessarily so we are urging lenders to continue to treat people in arrears fairly and we are calling on the government to maintain the mortgage rescue scheme and existing help towards mortgage interest payments for those who have lost their jobs.
“It is also vital that debt advice for homeowners continues to be a funding priority, including free legal advice in court for those facing repossession action by their lenders, where it is estimated that immediate repossession is avoided in 85% of cases where people attend court and receive advice on the day.
“It would also be a timely opportunity to introduce a statutory debt management plan to ensure that people in arrears are able to pay their debts according to priority, not who is shouting the loudest which can make the difference between keeping or losing a home.”
Helen Newton, spokeswoman for the Money Advice Trust, added:"The continuing fall in repossessions is a positive sign that mortgage lenders and borrowers have learnt to work together in resolving problems arising from mortgage debt. Ultimately, repossession benefits no one - borrowers lose their home, lenders take a big hit in losing the mortgage repayments and the Treasury finds itself up to another £16k out of pocket*.
"We would urge the continued leniency shown by lenders and that they should only consider repossessing someone's home as an absolute last resort, when all other possible options have been exhausted. The continuing downward trend in repossessions suggests that all parties seem to be taking this on board.
"That said, there were still nearly 20,000 repossessions in the first half of 2010**, and given that the Department for Communities and Local Government (CLG) estimate the cost to the Government of repossessing a vulnerable household to be around £16k, it is clear that continued hard work and cooperation between Government, money advice agencies and mortgage lenders is required to ensure the downward trend continues and the Chancellor's bill for repossessions is minimised.
"It is also encouraging to see mortgage arrears in decline too; however we are concerned that any rise in interest rates will quickly reverse this trend with many borrowers unable to make increased repayments.
"For those struggling with debt, it is important to recognise that your mortgage should be a top priority when allocating debt repayments."
