Repossessions forecast 'overestimated', say mortgage lenders

Published 23rd Jun 2009

Council of Mortgage Lenders reports better news, but home repossessions are still at their highest level since 1992


More homeowners are likely to avoid repossession than previously expected during the recession, according to the Council of Mortgage Lenders. But the CML's announcement today that it had overestimated the number of people likely to lose their home this year coincided with data showing the number of actual repossessions in the first three months were 62% higher than a year earlier.

The CML has cut its estimate for the number of homeowners facing repossession this year to 65,000, from its previous estimate of 75,000. However, the new figure is still the highest since 1992.

The lenders' organisation said conditions in the housing and mortgage markets remained "extremely challenging", but the string of interest rate cuts had made it easier for many struggling families to pay their bills. Government initiatives aimed at preventing people losing their homes have also helped.

Some 40,000 UK families and individuals were forced to hand their keys to their mortgage lender in 2008. Last week, a leading economist, Ian Shepherdson, predicted repossessions would jump to between 100,000 and 120,000 a year by 2011, as levels of unemployment increase and incomes become squeezed.

The CML expects there will be about 425,000 borrowers at least three months behind with their home loan payments by the end of this year – down from its earlier forecast of 500,000.

"Large cuts in interest rates have benefited many, making it easier for households who suffer a loss of income to continue to pay their bills," said a spokesman. "As a result, we expect fewer borrowers to fall behind in their mortgage payments this year than previously, and fewer possessions. But the deteriorating labour market means the number in arrears will still rise."

The Financial Services Authority (FSA) said the number of people losing their homes had grown "significantly" since late 2007. The number of repossession cases in the last three months of 2008 was down slightly on the previous three months. But the upwards trend has since resumed, with a 13% rise in the first quarter of this year to 14,825. This is 62% up on the 9,174 repossessions in the same period last year.

The FSA also said it had uncovered "continued weaknesses" in the way some specialist firms were handling mortgage arrears and repossessions.

Four firms have been referred to the watchdog's enforcement division for investigation and several more are being assessed for referral. "In many cases, the FSA found a high incidence of mortgages moving straight into arrears, and potential breaches of responsible lending rules," said a spokesman.

The government has announced a range of measures to help people stay in their homes, including a "mortgage rescue scheme" and new guidance for the courts to ensure lenders take all reasonable steps to avoid repossession.

Ministers said yesterday they were doubling the funding available to provide those who face losing their homes with free legal advice. Housing minister John Healey said the government was increasing the extra money for the service from £750,000 to £1.5m.

The CML said banks and building societies still faced big challenges in increasing the supply of money available to lend to homebuyers.

"Taken together with a still weak economic backdrop, housing activity is likely to remain subdued for some time yet," it said. "The raft of measures taken by the authorities has stabilised the economy and will sow the seeds for a recovery over time, including in the housing market. But the improvement is likely to be slow and drawn out."

Source: ' Guardian '

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