2011 repossessions lowest since 2007, says CML

By Bridging Loan Directory -

 

The total number of properties taken into possession by first-charge mortgage lenders in 2011 was 36,200, according to new data from the Council of Mortgage Lenders. This was the lowest annual total since 2007.

For the fourth quarter of 2011, the period for which new data is available, the number of repossessions was 8,500 – nearly 9% down from 9,300 in the third quarter, but 5% up from 8,100 in the fourth quarter of 2010.

Mortgages taken into possession, %

Source: CML data

On arrears, there continued to be a modest improvement across all arrears bands (see note 2) in the fourth quarter, and in 2011 as a whole compared with the previous year. At the end of 2011, 159,400 mortgages had arrears equivalent to 2.5% or more of the mortgage balance, 7.5% down from 172,400 at the end of 2010.

Buy-to-let properties accounted for 5,900 of the repossessions in 2011, up from 4,700 in 2010. The overall repossession rate was 0.32% in 2011 – 0.31% on owner-occupied properties, and 0.42% on buy-to-let. This compares with an overall rate of 0.33% in 2010 – 0.32% on owner-occupied properties, and 0.36% on buy-to-let.

The higher repossession rate on buy-to-let is not reflected in the arrears experience, however, with the buy-to-let sector experiencing a lower level of arrears than the owner-occupier sector. While the 3 months arrears rate stood at 1.98% of all mortgages at the end of 2011, the proportion was higher among owner-occupiers (2.06%) than among buy-to-let mortgage holders (1.38% if receiver of rent cases were excluded; 1.79% if included).

Mortgages more than three months in arrears, %

Source: CML data

Although arrears and repossessions throughout 2011 were fairly stable, the CML has no current plans to revise its current 2012 forecasts for the year. Worsening unemployment and continuing pressures on the cost of living seem likely to result in some further deterioration in the position of households in 2012. The CML anticipates that this is likely to result in around 45,000 repossessions and around 180,000 mortgages in arrears of 2.5% or more by the end of the year.

CML director general Paul Smee said:

“Low interest rates and good arrears management by lenders are helping the vast majority of those borrowers who face difficulties to keep their homes and get back on track. This will continue, but in the face of wider economic difficulties and rising unemployment, we are concerned that there will be a higher number of people facing more serious problems in 2012.

“Anyone worried about their finances should talk to their mortgage lender and take advice on their other debts as soon as possible. This will give them the best possible chance of staying in their home even if they have a spell of financial difficulty. Forbearance cannot be indefinite; but for most households arrears are temporary and can be resolved.”

Nick Hopkinson, Director of property company, PPR Estates commented:

“Buy to let (BTL) continues to grow in popularity amongst private investors and banks despite the wider credit crunch continuing. At around 13% of all UK home loans, it remains a small part of the mortgage market but is increasingly seen as a lucrative source of profit by the big lenders. Arrears are generally much lower amongst BTL owners than other mortgage borrowers and with higher interest rates and banking charges the norm in this sector of the market it’s not difficult to see why the number of mortgage products available has mushroomed for landlords recently. As lenders get a better understanding of the long-term mentality of most private landlords, and the low default risks associated, they will continue to grow lending in this niche market further. Landlords themselves are increasingly excited about the high rent yields available in the current buyers market and most are seeking to grow their portfolios this year if they have money to invest.

“Repossessions have remained lower than anticipated due partly to increased forbearance by the main banks. The slow motion nature of the credit crunch that we are still in the middle of has also meant we are likely to see years of above average repossessions rather than the massive spike and fallback that previous recessions have witnessed. The total number of repossessions and personal misery will be no less over the history of the current recession just more spread out unfortunately.

“Long term arrears amongst mortgaged homeowners remain dangerously high at over 2% of all households. This is over four times the long running average amount of homeowners in arrears and indicates that there are around 1 million homes struggling with debts despite nearly three years of record low interest rates. Anyone still struggling with arrears is going to find inflation and their falling household incomes only getting worse in 2012. As the wider recession/economic stagnation continues to drag on this can only be bad news for UK house prices as interest rates can only go up from here, even if it takes another couple of years to do so.”