A combination of low interest rates, a responsible approach by borrowers and lenders, and support from the government and debt advisers has been helping to keep payment problems in check.
But, with the economic outlook uncertain and in the wake of the 40% cut on 1 October 2010 in the rate at which support for mortgage interest is paid to the minority of households eligible for it, the CML believes support for borrowers in difficulty must be sustained throughout 2011 and beyond.
Data published by the CML shows that 8,900 properties (representing 0.08% of mortgages) were taken into possession in the third quarter of 2010. The total was 5% lower than the 9,400 cases of possession in the preceding three months, and the fourth consecutive quarterly decline. The number of properties taken into possession was 27% lower than the 12,200 in the same period a year ago.
In the first nine months of the year, there have been 28,400 cases of possession, trending below the CML's revised forecast of 39,000 for the year as a whole - and significantly lower than the original forecast of 53,000 properties. This shows the benefits for many borrowers of co-ordinated efforts to help them and to provide a better safety net of support than in the 1990s.
There was also a modest improvement in the number of mortgages in arrears. CML data showed that 176,100 mortgages (1.55% of the total) had arrears of 2.5% or more of the outstanding balance at the end of September, down from 178,200 at the end of June, and from 203,800 a year earlier. This is consistent with the CML's prediction of 175,000 mortgages in arrears at the end of the year, and lower than our original forecast of 205,000 cases.
Commenting on the data, the CML's director general Michael Coogan said: "Despite the severity of the economic slowdown, and the likelihood of only a slow and protracted recovery, a combination of low interest rates and the commitment of borrowers, lenders, the government and debt advisers has helped to keep mortgage payments problems in check so far. But we cannot take falling arrears and possessions for granted, and the recent welcome trend may reverse.
"The government's decision to maintain current eligibility criteria for support for mortgage interest until the end of next year is welcome, but the impact of the recent cut in the rate at which it is paid has yet to show through in our figures. Not all borrowers are in the same circumstances, whether receiving benefit or not, but lenders will continue to treat each of them fairly, show extended forbearance where possible, and ensure that possession is a last resort.
"Borrowers react in different ways to a reduction in income or higher borrowing costs when interest rates rise. Independent research we published earlier this month highlighted that many households are, in fact, adept at adjusting their spending and prioritising their bills to manage their way successfully through periods of temporary difficulty. But the capacity to do this will depend on individual circumstances, the extent to which income falls or mortgage costs rise, and how soon they can get back into full employment. Financial problems will persist but remain manageable, as today's figures show.
"The government continues to have a vital role to play. So far, there has been welcome support through the severe recession, and this has reinforced the capacity of lenders and borrowers to deal with individual problems. But we cannot afford to lose our focus on the long road towards recovery from here, which is why the CML proposes further work with the government and debt advice agencies to enhance support for borrowers in difficulty."
