Home repossessions drop to five-year low, lenders say

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Media captionDirector general of the CML Paul Smee: "The engagement between borrower and lender has helped people stay out of arrears"

The number of homes being repossessed has fallen to a five-year low, according to mortgage lenders.

The Council of Mortgage Lenders (CML) said there were 8,200 repossessions in the third quarter of 2012, the lowest quarterly number since 2007.

The number of borrowers in arrears was stable, at 159,100.

Repossessions have fallen steadily in recent years, due to low interest rates and lenders showing restraint with borrowers in difficulty.

The figure for the three months from July to September was down from 8,500 in the second quarter of this year, and lower than the 9,600 repossessions recorded in the same period a year ago.

"Our figures show that good communication and effective arrears management by borrowers, lenders and money advisers are helping the vast majority of those with mortgage repayment problems," said the CML's director general, Paul Smee.

"The rate of repossession has continued to fall and it's clear that lenders want to keep people in their homes."

Downward trend

Last year, the CML forecast that 45,000 homes would be seized this year by mortgage lenders who had run out of patience with borrowers who were unable to repay their home loans.

However, only 26,300 properties have been repossessed in the first nine months of this year, 8% fewer than at the same stage of 2011.

The economy has been in recession for much of the past four years, with unemployment rising to its current level of just under 8%, but a number of factors have kept repossessions down.

Among them have been the record low level of interest rates that borrowers have to pay, as a result of the Bank of England's decision to slash the bank rate to its historically low level of just 0.5%.

Lenders have been under pressure not to repossess properties unless it is genuinely a last resort; they also have to jump through many hoops to successfully obtain court permission to seize a borrower's home.

Richard Sexton, of e.surv chartered surveyors, warned that the number of people with the highest arrears - amounting to more than 10% of their outstanding mortgages - had risen again, to 29,000.

"Long-term arrears have risen yet repossessions are down, which is thanks to lenders' generous forbearance policies," he said.

"This is the fourth quarter in a row where arrears of 10% or more have increased, yet repossessions have remained broadly flat.

"Banks won't be able to go on absorbing long-term arrears into their balance sheets infinitely, and they also have a duty of care to ensure borrowers don't build up too much debt by allowing them to stay in a property if this is unsustainable," he added.

Court actions fall

Unless there is a dramatic reversal of the current downward trend then repossessions for the whole of 2012 are likely to be about 35,000.

That would be lower than in any year since 2007, which was just before the onset of the international banking crisis and credit crunch.

That year, there were 25,000 repossessions in the UK.

A good indication that repossessions will keep on dropping gently comes from separate statistics published by the Ministry of Justice.

They show that the number of repossession actions started in the courts in England and Wales also fell again in the third quarter of the year.

There were 14,168 such claims started by lenders, which was slightly lower than in the second quarter and a continuation of the general downward trend in these numbers since the first half of 2008.

Court actions for repossession are now running at roughly half the level recorded four years ago.

Mark Harris, of mortgage broker SPF Private Clients, said: "While interest rates are expected to remain at 0.5% for the foreseeable future, some borrowers are still struggling to afford their mortgage, as living costs continue to rise and many lose their jobs."

"Lenders must continue to show forbearance and look after customers who are struggling by letting them switch to interest only, take payment holidays or extend their mortgage terms."

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