Low interest rates and determination by property lenders to help resolve mortgage payment problems are keeping the number of arrears and repossessions in the UK manageable but few experts predict that the situation is going to improve much.
The latest figures from the Council of Mortgage Lenders show that the number of mortgage re-possessions fell in the second quarter of the year and arrears levelled off but the organisation is warning that the property lending industry must not be complacent.
It points out that a combination of factors has helped keep mortgage arrears and re-possessions in check, despite the recession. Most importantly, lenders are showing forbearance to borrowers where customers are trying to resolve their payment problems and have a realistic chance of doing so.
And low interest rates are helping ensure that arrears grow less quickly, giving borrowers a better chance of getting back on track and lenders more scope to extend forbearance with government schemes providing some help for borrowers in difficulty by promoting early communication between borrowers, lenders and debt advisers.
But while the figures reflect the efforts being made to manage mortgage arrears and avoid re-possession if possible, the potential scale of future payment problems remains while the economy is still weak. Rising unemployment is regarded as the main threat and is expected to lead to a rise in arrears and re-possessions in the second half of the year.
And an examination of the latest figures gives an idea of the fragile state of the industry. For example, there were 11,400 re-possessions in the second quarter of 2009, 10% fewer than in the first quarter of the year but this is till 14% more than the second quarter of 2008 and it is the equivalent of one mortgage in 1,000.
The figures also show a modest deterioration in arrears by 2.5% or more of the outstanding amount due but the level of arrears of three months or more is somewhat higher.
The CML has been forecasting a total of 360,000 mortgages in arrears in 2009 but the figures for the midyear show 205,600 are already at that stage. Head of policy Jackie Bennett said the CML will continue to monitor developments and keep forecasts under review.
‘With unemployment rising and the economy still weak, the outlook will remain challenging for the rest of this year and into 2010. But our data shows that lenders are committed to helping borrowers manage their way through temporary payment problems and get their mortgage back on track over time, avoiding re-possession where possible,’ she said.