Repossessions drop to 18-month low, lenders say

Empty house Help for unemployed mortgage borrowers has been crucial in keeping repossessions down, lenders say

The number of homes being repossessed in the UK has fallen to its lowest level since the end of 2010, says the Council of Mortgage Lenders (CML).

There were just 8,500 repossessions in the second quarter of the year, down from 9,600 in the first quarter.

The drop has come despite the economy falling into recession and the high level of unemployment.

The CML said repossessions were being suppressed by low interest rates and help for unemployed mortgage borrowers.

"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," said the CML's director general, Paul Smee.

The figures mean that repossessions are running at a slower rate than the CML had expected.

Its original forecast for the whole of this year was that 45,000 homes were likely to be seized by lenders.

A key factor in the better-than-expected outcome so far has been the impact of the government's Support for Mortgage Interest (SMI) scheme.

This covers the mortgage interest payments of unemployed people on up to £200,000 of their home loan.

The support kicks in after a 13-week waiting period - a temporary rule that has been in place since the start of 2009.

However, the scheme is due to revert to its original 39-week waiting period at the end of this year.

The CML said it was vital that the government kept the 13-week rule in place, to help stave off any future rise in repossessions.

"Decisions by the authorities to cut interest rates aggressively and introduce better protection for borrowers through more generous entitlement to SMI meant that lenders were able to avoid possession to a much greater extent than we expected," the CML said.

"Over the last three years, paying SMI after a three-month qualifying period and providing more generous cover have helped nearly 250,000 people stay in their homes at any one time," it added.

Still struggling

Repossessions for 2012 appear to be on track to be slightly lower than last year and the lowest since 2007.

Start Quote

"We'll soon reach a tipping point where the market will be hit by a glut of repossessions”

End Quote Richard Sexton e.surv chartered surveyors

The CML reported that the number of borrowers in arrears, of 2.5% or more of their outstanding mortgage, was flat.

There were 157,400 people in this position in the second quarter of the year, slightly fewer than in the first three months.

However, the CML warned that things could take a turn for the worse if the economy deteriorated further.

"The Bank of England forecast for growth reminds us of the pressures that may disturb the current pattern of stability," Mr Smee said.

Richard Sexton, of e.surv chartered surveyors, said thousands of distressed borrowers were being kept on "life-support" by their lenders.

"To banks' credit they've done everything they can to keep people in their homes, but now the economy is slipping downhill they'll be forced to switch those life-support machines off," he said.

"We'll soon reach a tipping point where the market will be hit by a glut of repossessions once banks decide they can no longer afford to sustain all of these 28,000 struggling borrowers [in long term arrears]".

Mark Harris, of mortgage brokers SPF Private Clients, added:

"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 on to a cheaper deal."

Fewer court actions

The latest statistics from the Ministry of Justice showed that the number of repossession actions started by lenders in the courts in England and Wales - the start of the repossession process - fell by 8% in the second quarter from the first, to just 15,050.

The number of such claims that were eventually approved by a judge, leading to the granting of a possession order, also fell by 8%, to 11,642.

And of these, nearly half were suspended to give the borrower more time to sort out a way of making some payments, as an alternative to their home being seized.

"This fall in the number of claims coincides with lower interest rates and a proactive approach from lenders in managing consumers in financial difficulties," the MoJ said.

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