This was accompanied by a continuing welcome fall in the numbers of households facing mortgage arrears. But in its new risk review, designed as an early warning system of changes that could lead to a rise in arrears, the CML cautions that there is no room for complacency.
4,270 properties were taken into possession by mortgage lenders during the first half of 2003. This was 37% fewer than in the first half of 2002, when 6,850 repossessions occurred. The CML has reduced its forecast for the likely number of possessions for 2003, and now expects around 9,600 for the year as a whole.
The arrears picture is also positive. At 14,440 the number of mortgages in arrears of more than 12 months fell by 20% compared with the first half of 2002, and was 12% lower than in the second half of the year. The number of 6-12 month cases fell to 33,560 (19% lower than in the first half of 2002 and 1% lower than in the second half of 2002) while the number of 3-6 month cases fell to 60,960 (18% lower than the first half and 8% lower than the second half of 2002).
Against this backdrop, there is an obvious risk of complacency. But the CML urges the Government, the FSA, lenders and borrowers themselves not to lose sight of the fact that personal borrowing is standing at very high levels. It makes sense for borrowers to think about how they can offset the risks they face, even in a low interest rate environment. The CML is currently discussing with the FSA the best way of ensuring that all mortgage borrowers receive a consistent message about risk, supported by clear information about how to manage it, as part of the new structure of mortgage regulation.
Michael Coogan, CML Director General, commented: "The continuing reduction in arrears and possessions is obviously good news. But at the same time it makes sense to plan ahead for a less benign economic environment. This is what the CML is doing. Without scaremongering, we want to make sure that borrowers are encouraged to adopt sensible measures to reduce their risk of mortgage arrears in the future. There is no difference here between the interests of borrowers and lenders, as both benefit from a sustainable home-ownership market where risk is properly managed.
"We do not foresee major problems in the near future. But interest rates are expected to rise next year, albeit modestly, and economic uncertainty remains. Against this backdrop we would urge all borrowers, and especially those who have bought recently and carry high levels of debt, to ensure that they are building in enough flexibility to their household finances to be able to cope with higher mortgage payments."
