The number of mortgage repossessions rose from 8,140 in the first half of 2006 to 8,860 in the second half. This brings the total for 2006 to 17,000 - 65% higher than in 2005, but broadly similar to 2001 levels and roughly 1 in 690 mortgages.
Back in December, the CML had forecast that there would be 18,000 repossessions in 2006, 2007 and 2008. However, the rate of increase in repossessions slowed down toward the end of 2006, resulting in a more positive outturn than expected.
But the CML is now forecasting that repossessions will rise modestly to 19,000 in 2007 and 20,000 in 2008. This reflects a slight worsening in prospects as a result of higher interest rate expectations since the previous forecast.
On arrears, the number of mortgages more than six months behind on payments fell by 8.5%, from 49,010 at the end of 2005 to 44,840 at the end of 2006. This represents only 0.38% of all mortgages - approximately 1 in 260.
Shorter term arrears, of 3-6 months, also fell. There was a 6% decline between the end of 2005 and the end of 2006, from 62,920 to 59,100 cases.
The CML expects short term arrears to rise during the course of 2007, mostly because of the effects of higher interest rates. The effect may be more pronounced in the second half of the year than the first, since interest rates take a while to feed through into repayment difficulties for borrowers. The strong likelihood is that the vast majority of these short term payment problems will be successfully managed by borrowers and lenders without becoming long term arrears cases.
The CML has also today published the Repossession Risk Review, its half-yearly round-up and analysis of trends and risks. Highlights include:
- The arrears rate on buy-to-let mortgages has consistently been lower than on home-buyer mortgages since the CML started collecting buy-to-let arrears data in 1998. But the difference has narrowed.
- Regional differences exist - over the past few years London has seen the biggest increase in the number of court actions seeking possession relative to the number of mortgaged properties, with other southern regions also showing larger increases than elsewhere.
- There appears to be less correlation than might be expected between unsecured credit problems and mortgage arrears, and the picture here has remained broadly stable over the past year. Around 4% of all mortgage borrowers see themselves as having heavy unsecured commitments, and around half of these (2% of all mortgage borrowers) experienced mortgage payment difficulties in 2006.
Michael Coogan, CML director general, commented: "The arrears picture at the moment is fairly complex. On the one hand, the wave of problems caused by previous interest rate rises has now worked through, so recently arrears levels have fallen. On the other hand, interest rates are rising again, and payment shock may be an issue for some this year as their existing fixed or discounted deals expire.
"Overall, we expect the total number of mortgages at least three months behind with their payments to rise from around 105,000 last year to 130,000 this year, before falling back again to 120,000 next year. Repossessions are likely to creep up from around 17,000 last year to 19,000 this year and 20,000 next year - higher than the low of 6,030 in 2004, but still only around a quarter of the 1991 peak of 75,540. Since 1991, we have also gained an extra 1.9 million mortgages in the market."
