A combination of factors has helped keep mortgage arrears and possessions in check, despite the recession. Most importantly, lenders are showing forbearance to borrowers where customers are trying to resolve their payment problems and have a realistic chance of doing so. Low interest rates are helping ensure that arrears grow less quickly, giving borrowers a better chance of getting back on track and lenders more scope to extend forbearance. And government schemes are providing some help for borrowers in difficulty by promoting early communication between borrowers, lenders and debt advisers.
But while today's figures reflect the efforts being made to manage mortgage arrears and avoid possession if possible, there can be no complacency about the potential scale of future payment problems. While the economy remains weak and with unemployment still growing, arrears and possessions are likely to rise in the second half of the year.
Today's figures show that there were 11,400 cases of possession (equivalent to one mortgage in 1,000) in the second quarter of 2009, 10% fewer than the 12,700 in the first quarter of the year but 14% more than the 10,000 cases of possession in the second quarter of last year.
The data also shows only a modest deterioration in arrears during the second quarter. As at mid-year, the number of loans in arrears by 2.5% or more of the outstanding mortgage balance totalled 205,600 (1.85% of all loans). That compares with a total of 203,900 at the end of the first quarter, and 139,700 at the end of the second quarter of 2008.
The level of arrears of three months or more is somewhat higher. This is partly because earlier sharp falls in interest rates continue to inflate the number of monthly payments that a given monetary amount of arrears represents. But again the increase over the quarter was limited. At the end of June, the number of three months-plus cases stood at 270,400 (2.43% of mortgages), compared with 264,700 (2.38%) in the first quarter and 152,700 in the second quarter of 2008.
Today's figures mean that the total number of possessions in the first half of 2009 stands at 24,100, compared with our forecast for the whole year of 65,000. The half-year total of 205,600 mortgages in arrears by 2.5% or more of the outstanding mortgage balance compares with our forecast of a total of 360,000 by the year's end. In June, we revised downwards our expectations for arrears and possessions for the year as a whole, and we will continue to monitor developments and keep our forecasts under review.
Commenting on our data, the CML's head of policy Jackie Bennett said: "With unemployment rising and the economy still weak, the outlook will remain challenging for the rest of this year and into 2010. But today's data shows that lenders are committed to helping borrowers manage their way through temporary payment problems and get their mortgage back on track over time, avoiding possession where possible.
"Clearly, low interest rates are also helping borrowers who are committed to working to resolve their arrears, paying what they can - and when they can - towards their mortgage, and maintaining good communication with their lender.
"Lenders can only show forbearance if borrowers show a continuing determination to address their problems and discuss them with the lender at the earliest opportunity. So, the key message continues to be to talk to your lender as soon as possible when difficulties emerge and take advice from an independent money adviser if you have other debts as well as your mortgage."
