The figures were published in its half-yearly data on mortgage arrears and possessions. The CML has revised its previously published data back to the beginning of 2003.
More lenders have begun to contribute to the CML's arrears and possessions survey (68 CML members accounting for 94% of members' mortgage business). This has revealed that the previous sample was less representative of the total market than previously believed. As a result, the CML has introduced weightings to reflect the changing composition of lending when grossing up the numbers to provide its estimate for the whole of the market.
Taking into account the revisions, the number of mortgages in arrears of three months or more at the end of June rose to an estimated 125,100, up 4% compared with the end of December but 3% lower than at the end of June 2006. Of these, the majority (71,800) were in arrears of 3-6 months, while 38,300 were in arrears of 6-12 months, and 15,000 more than 12 months. Around 1% of all mortgages were in arrears - this proportion has been stable at low levels for several years.
At 14,000, the number of properties taken into possession in the first six months of the year rose by nearly 18% compared with the previous half-year, and nearly 30% compared with the first half of 2006.
Although significantly higher than in the recent past, when possessions reached extremely low levels, the number remains low by historical standards. It equates to around 1 in 840 mortgages ending in possession in the first half of this year.
Possessions have risen more sharply than arrears for the past two years.
This is likely to reflect a number of factors, notably:
- The impact of an increasing amount of non-conforming lending within the overall market, where the higher risk nature of the business means that arrears are more likely to translate through to possessions, and that this is likely to happen at an earlier stage.
- Increasingly active arrears management by all lenders - lenders now typically seek contact with the borrower to establish a repayment plan as soon as one payment is missed, so it is likely that many households avoid falling further into arrears unless their financial situation makes this unavoidable.
Michael Coogan, CML director-general, commented: "The sharp rise in repossessions in the first half of this year has been driven by a combination of factors, but the absolute number of repossessions is still low by historical standards.
"Interest rates are clearly higher than many were expecting, and are set to remain so. And the greater risks inherent in sub-prime lending are resulting in significantly higher levels of repossession in that part of the market compared to mainstream experience. This impact has been underestimated in our past market data, which we have now revised. While the revisions are naturally unwelcome, more accurate market information is important. We will work to further improve data on both mainstream and specialist sectors.
"Overall, the vast majority of mortgage borrowers will continue to cope, even in a market where affordability is stretched. But anyone who thinks they may face difficulties should talk to their lender early to explore their options - lenders see possession as a last resort, but allowing arrears to mount up makes repayment difficulties more difficult to deal with, and is not a sustainable strategy for everyone."
