Rates prompt rethink on repossessions

By Jon Massey on July 3, 2009 11:25 AM |

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By Steven Davies

Lower interest rates have prompted an industry body to rethink its prediction of the number of homes likely to be repossessed ths year.

Although the housing market remains in a precarious position, the Council of Mortgage Lenders believes the fall in rates combined with increased levels of tolerance from lenders and government intervention schemes has given a spark of hope to those facing reposession.

As a result the council, which has a membership covering 98 per cent of all UK residential property lending, has amended its forecast from 75,000 repossessions this year to around 65,000.

Bernard Clarke, the council's communications manager, said: "A variety of factors have led to a move toward lower interest rates for a much longer time than expected.

"This means borrowers are more able to work their way through any trouble. Borrowers who suffer a loss of income are more capable of continuing to pay their bills.

"Many people are finding that any arrears they may be accruing are not nearly as high as they would be during a period of increased interest rates."

Mr Clarke is also keen to highlight the benefits of government and industry initiatives in boosting the prospects of borrowers.

He said: "Lenders currently feel the need to show forbearance.

"If the borrower tries to engage with their lender they can, more often than not, work together and come to an arrangement.

"There has been a range of initiatives launched by the Government in co-operation with the industry.

"We now have the Mortgage Rescue Scheme, which is new, so may not have helped too many people at this point.

"Also changes have been made to the levels of income support for mortgage interest, and the Homeowner Mortgage Support Scheme.

"All of these things put together and combined with lower interest rates mean that, as long as a struggling homeowner maintains contact with their lender, help is always at hand."

However the CML expects 360,000 mortgages to be in arrears by the end of the year, a figure that represents 2.5 per cent of the overall mortgage balance.

This is a result of the expected continuation of job losses and disruption to incomes across the country as a result of the recession. This figure is 15 per cent lower than the council's original forecast.