But this welcome decline gives no cause for complacency as a large number of households, who are just coping, still remain vulnerable to shocks that may arise from the economic uncertainty ahead.
Repossessions as a proportion of all mortgages remained steady at 0.09% in the first quarter, the same proportion as in the previous quarter and down from 0.12% in the first quarter of 2009. The number of repossessions was 9,800, down from 10,600 in the previous quarter and 13,200 in the first quarter of 2009.
The proportion of mortgages in arrears also fell. The total proportion of loans with arrears equivalent to 2.5% or more of the mortgage balance was 2.38%, down from 2.52% in the previous quarter and 2.81% in the first quarter of 2009. The number of loans in arrears was down from 206,800 at the end of the first quarter of 2009 and 196,400 at the end of last year to 186,300 at the end of the first quarter of this year.
However, the fall was more marked in the lower arrears bands than among those with more substantial arrears, where the reduction was only very modest. This suggests that low interest rates and relatively stable employment have been helping to prevent new households falling into difficulty, but that many households with more entrenched problems are still struggling to restore their financial position and repay arrears. This debt overhang will require careful management over an extended period.
Against a backdrop of significant continuing economic uncertainty, the CML is cautious about revising its forecasts for the number of arrears and possessions cases in 2010, although it expects to do so later in the summer. However, if current levels of government support continue, if interest rates do not rise, and we have no new economic shocks, the 53,000 repossessions forecast for the year is pessimistic.
Despite this welcome assessment, and mindful of the pressures on the public finances facing the new government, the CML strongly emphasises the need for ongoing commitment from government to supporting home-owners facing financial difficulty. There is a risk that higher interest rates or unemployment would tip into arrears a number of finely-balanced households who are currently coping, and would undermine the capacity of households struggling to get back on their feet.
CML director general Michael Coogan commented: "With all eyes on the new government and what steps it will take to address the fiscal deficit, we cannot emphasise too strongly the importance of continuing to fund the support mechanisms that are proving effective in containing mortgage arrears and repossessions.
"We hope and expect to be able to revise down our 53,000 forecast for repossessions in 2010, but we are acutely conscious of the beneficial influence that low interest rates and the package of support have played so far. The dampening effects on households and the wider housing market that fiscal tightening is likely to exert are still to be felt, but it should be a key priority to support borrowers most in need and maintain funding for the government’s housing policies."
