Repossessions fall to 18 month low

The decline in the second quarter from a total of 9,600 possessions in the first three months of 2012 was in line with a seasonal pattern seen in each of the past three years.

The number of mortgages in arrears remained broadly flat in the second quarter. At the end of June, the number of loans with arrears of 2.5% or more of the outstanding balance stood at 157,400, fractionally lower than the total of 157,800 at the end of the first quarter.

Levels of arrears in lower and middle bands were slightly lower than in the preceding three months but there was a small increase (from 28,000 to 28,300) in those mortgages with the highest levels arrears, of more than 10% of the balance.

The data show the number of possessions totalled 18,100 in the first six months of 2012 implying that possessions so far are on a lower trajectory than the CML forecast of 45,000 for the year as a whole.

But the CML warned that the Bank of England forecast for flat growth may increase pressures on household finances, distrubing the current pattern of stability.

CML director general Paul Smee said: "The figures show that lenders, borrowers and debt advisers are working together to get through the current period of economic difficulty and keep mortgage possessions in check. Generally, when borrowers prioritise their mortgage commitments, lenders can provide help appropriate to their individual circumstances.

"But success in managing temporary payment problems depends on everyone working together and it is essential for anyone worried about their mortgage to talk to their lender as soon as possible."

Mark Harris, chief executive of mortgage broker SPF Private Clients, warned that although the number of repossessions declined in the second quarter the CML is sticking with its original forecast of 45,000 for the year - an increase on 2011 - because of the difficulties in the economy.

And he added: "That repossessions are likely to rise for the year as a whole is depressingly predictable. Although interest rates are expected to remain at 0.5% for the foreseeable future, a growing number of borrowers are still struggling.

"Mortgage rates continue to rise, despite the non-movement of base rate, with more than a million homeowners seeing an increase in mortgage rates in May, for example. Those with little or no equity in their homes don't have the luxury of being able to remortgage onto a cheaper deal.

'More than ever, the mortgage market is divided into the haves and the have-nots. Although several lenders have introduced chart-topping 5-year fixes at record lows, only those borrowers with sizeable deposits or similar levels of equity in their home can benefit. Those up against it and in danger of having their homes repossessed don't have this equity cushion so can't access these market-leading deals. Subsequently, an increasing number of homeowners are getting into difficulty paying their mortgage because they can't afford the payments on top of high living costs, low wage rises, and in some cases, losing their jobs."

Meanwhile repossessions made by second charge mortgage providers were down by 37.2%1 in Q2 2012 compared with Q2 2011, Finance & Leasing Association figures show. In Q2 2012, FLA’s second-charge mortgage lenders repossessed 147 properties.

The FLA has forecast that total repossessions made by second charge lenders in 2012 will be around 600-650 for the year.

Fiona Hoyle, head of consumer finance at the FLA, said: “Repossession levels for second charge mortgage lenders continue to fall as lenders do all they reasonably can to help customers in financial difficulty to remain in their homes. Due to forbearance by lenders, the FLA has now lowered its forecast for 2012 repossessions.

“But lenders recognise that the situation could change if the economic situation worsens.”