Home repossessions 'drop 20% in a year'

Houses Image copyright PA
Image caption Homes are repossessed if owners fall too far behind on mortgage repayments

The number of homes repossessed in the UK in the first three months of 2014 was higher than the previous quarter but 20% down on a year earlier.

Some 6,400 homes were taken by lenders after owners fell too far behind on their mortgage repayments, the Council of Mortgage Lenders (CML) said.

This was up from 6,100 on the previous quarter but down from 8,000 during the same period a year earlier.

The number of mortgage customers in arrears fell to a six-year low.

Some 138,200 mortgages had arrears of more than 2.5% of the outstanding balance, the lowest level since the second quarter of 2008.

"The downward trend in the number of mortgages in arrears or ending in repossession is obviously very welcome. Repossession is absolutely the last resort - the aim is to keep people in their home and get their finances back on track wherever possible," said Paul Smee, director general of the CML.

"Lenders fully recognise that behind the numbers, these are real households, with differing circumstances. Lenders try to ensure that all borrowers are treated fairly and sensitively."

However, figures from the Ministry of Justice show that the number of private and public sector tenants at risk of eviction was at its highest for more than a decade.

There were 47,220 possession claims in England and Wales in the first three months of the year against tenants who have fallen behind on rent. This is the first stage of the eviction process and the numbers have been rising since 2010.

Rate rise warning

Falling arrears and repossessions are connected to low mortgage rates for homeowners in recent years.

The Bank rate, set by the Bank of England and a signpost for mortgage rates, has been at a record low of 0.5% since March 2009.

Estate agents and lenders have warned that were interest rates to rise, some homeowners could struggle with the increased mortgage bill.

"While the mortgage market is now the healthiest it has been for years, the overheating property market could still cause it problems," said Oliver Atkinson, director of the online estate agents

"Excessive levels of buyer confidence may tempt some people to overextend themselves. And when interest rates do rise, as they inevitably must, some could find themselves repeating the mistakes of the last crash."

New mortgage rules mean that lenders must test applicants' finances to ensure they are able to cope with higher monthly demands should interest rates rise.

There are more than 11 million mortgages outstanding in the UK, worth more than £1 trillion.

Separate figures from the Ministry of Justice also show a consistent drop in the number of homes that are at risk of repossession in England and Wales.

It said that the number of repossession claims - the earliest stage in the process - fell to its lowest level for more than a decade in the first quarter of the year. There were 12,704 claims recorded.

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