Mortgage arrears cases fall by 4%

Published 17th Mar 2010

Total number of mortgages in arrears in 2009 below predictions, as government continues to promote options available to struggling borrowers



The number of borrowers behind with mortgage repayments fell by 4% in the last quarter of 2009, as low interest rates continued to help homeowners meet their monthly bills, figures showed today.

By the end of last year 378,000 mortgage accounts were in arrears, defined as owing at least 1.5% of their outstanding loan, according to data from the Financial Services Authority (FSA).

The number of new arrears cases registered during that period was down 9% on the previous quarter at 41,000. The FSA said the number of such cases had fallen in each quarter of last year, and the figure for the final quarter was 39% lower than the same period in 2008, when the Bank of England first began to cut interest rates.

The number of new repossession cases was also down, falling by 15% quarter on quarter to 11,800 – the lowest figure since the summer of 2008.

At the end of 2008, lenders predicted repossessions would rise to record levels in 2009, with 75,000 homes being repossessed and 500,000 mortgage accounts going into arrears.

But borrowers have benefited from a series of interest rate cuts which took the Bank base rate from 5% in October 2008 to a historic low of 0.5% last March. In addition, a series of initiatives by the government and lenders have enabled some of those falling behind with their loans to stay in their homes.

Despite this, the FSA figures show that in the course of the year 54,000 homes were taken into possession.

This morning the government announced it was putting a further £2.5m into advertising its mortgage help website and the number for the National Debtline (0808 808 4000) in a bid to persuade more struggling borrowers to seek help.

The housing minister, John Healey, said: "We've pulled out all the stops with government support to help people avoid losing their home. More than 330,000 families have had help and advice with their mortgages over the past year, which is one reason why repossessions are running at half the rate of the last recession.

"I would urge anyone facing money worries not to bury their head in the sand, but to go to our repossessions help website or call the National Debtline to get help in keeping their home."

The FSA figures also showed how the face of mortgage lending has changed since the credit crunch. In the final quarter of last year just 1.5% of new mortgages were worth more than 90% of a property's value, compared with 14.8% in the middle of 2007 when the housing market was at its peak and loans of more than 100% were on offer.

Similarly, the proportion of new lending done at a high loan-to-value and high income multiple – defined by the FSA as more than 3.5 times a single borrower's income or 2.75 times joint borrowers' earnings – which accounted for almost 9% of new lending two years ago, made up less than 1% of new lending in the final quarter of last year.

Source: ' Guardian '

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