New figures indicate a fall in mortgage arrears and possessions

The number of mortgages in arrears is now at its lowest level since records began, as the second quarter of 2016 saw a continued fall in mortgage arrears and properties being taken into possession.

The Council of Mortgage Lenders (CML) has this week published data that reveals there were 92,500 mortgages in arrears by at least 2.5% of the balance (0.84% of the total) at the end of June, compared to 95,900 at the end of March.

On a yearly basis, the number of mortgages in arrears has fallen by 13.4%: the total stood at 106,800 last year. These figures are the lowest recorded since the run of figures began in 1994.

In terms of the number of properties taken into possession, the second quarter of 2016 saw possessions fall to 1,900, from 2,100 in the first quarter. The trend was seen in both owner-occupied (1,300, down from 1,500) and buy to let (500, down from 700) properties.

In its report the CML states that if the present trend continues, the number of mortgaged property repossessions this year is on course to be the lowest since 1982 (at which time there were 6.5 million mortgages as compared to 11.1 million today).

The CML’s breakdown of data also reveals a decline in the number of borrowers in each band of arrears, other than those owing more than 10% of the mortgage balance, where numbers rose slightly from 23,500 to 23,700.

The number of mortgage possessions is expected to be significantly lower for owner-occupied properties than it is for rental properties, and confirmation of this is awaited from Ministry of Justice figures. Previously, figures showed that there were 42,729 rental evictions in England and Wales in 2015, compared to 5,592 mortgaged property repossessions, despite the fact that the rental sector accounts for only one-third of the housing stock.

A different pattern emerges when comparing arrears in the owner-occupied and the buy to let mortgage markets. The CML found that arrears rates are higher among owner-occupiers than among buy to let landlords and Keystone Property Finance, the complex buy to let, commercial mortgage and short term finance lender, forecast recently that buy to let mortgage arrears are set to fall below 7,000 by the end of the year.

According to Keystone, latest official estimates show 9,300 cases of buy-to-let mortgage arrears as of Q1, down from 10,300 the previous quarter and 11,300 in Q1 2015.

Their projections therefore estimate that, as of Q2 2016, 8,500 buy-to-let mortgages will stand more than three months in arrears across the UK. This is expected to drop to 6,600 by Q4 2016.

Paul Smee, director general of CML said:

“Another welcome reduction in arrears and possessions shows that borrowers are continuing to prioritise their mortgage commitments and that lenders remain committed to helping them through a period of temporary difficulty, wherever possible. As ever, the key to success in dealing with any payment problems is to address them as soon as possible. Any borrowers anticipating difficulty in paying their mortgage should therefore speak to their lender at the earliest opportunity.”

Managing director of Keystone Property Finance, David Whittaker, added:

“Despite some wider changes in the lending landscape post-referendum we have seen no let-up in demand for buy to let mortgages and we don’t expect to see any change in the downward trend in buy to let arrears as a result. Landlords are confident – and lenders have no reason to feel any differently.”


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