Most importantly, lenders are working hard to avoid possession for borrowers who 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 avoid seeking possession as the final option. Government schemes are also providing some help to borrowers by promoting an early dialogue between borrowers, lenders and debt advisers.
Our figures showed that there were 11,400 cases of possession – equivalent to one mortgage in 1,000 – in the second quarter of the year. That was 10% fewer than the 12,700 possessions in the first three months of 2009, but 14% more than the 10,000 cases of possession in the second quarter of last year.
The figures also showed only a modest deterioration in arrears in the second quarter. By the end of June, 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 203,900 at the end of the first quarter and 139,700 at the end of the second quarter of 2008.
But while the recent data reflects all the efforts being made to manage mortgage arrears and avoid possession where possible, there can be no complacency about the scale of future payment problems. The economy is still weak and, with unemployment growing, arrears and possessions are likely to rise in the second half of the year.
There were 24,100 cases of possession in the first half of the year, compared with our forecast for the whole year of 65,000 (revised down from 75,000 in June). The half-year tally of 205,600 mortgages in arrears by 2.5% of the outstanding mortgage balance compares with our forecast of a total of 360,000 by the end of the year. We will continue to monitor developments and keep the forecasts under review.
Despite all the efforts to avoid possession, lenders are only able to help borrowers who show a continuing determination to address their problems. Communication with the lender is therefore crucial. So, a key message for borrowers continues to be to talk to the lender as soon as possible when difficulties arise and to seek advice from an independent money adviser if they have other debts on top of their mortgage.
