The reduction now means that the CML now expects 175,000 mortgages to end the year 2.5% or more in arrears (down from previous forecast of 205,000) and a total of 39,000 repossessions for 2010 (down from previous forecast of 53,000).
Bev Budsworth, managing director The Debt Advisor, said: “Today’s figures are certainly some good news. I think the continued reduction in the figures is mainly due to the concerted effort of the majority of lenders to help borrowers, coupled with the historic low interest rate since March 2009. The continued reduction in unemployment in June to 2.46million will have also eased the situation.
“Government initiatives have also played their part, the most effective of which was the ‘Pre-Action Protocol’ that forced lenders into increased dialogue with borrowers.
"This has inevitably meant that borrowers have become more proactive in dealing with their arrears which was evident in the reduction of repossessions in the first quarter of this year.
“However, the same cannot be said for other ‘helpful’ initiatives.
"The ‘Mortgage Rescue Scheme’ was supposed to help thousands of homeowners escape repossession but has, so far, only helped a few hundred.
"Worse still was the ‘Homeowners Mortgage Support Scheme’ that promised to help borrowers defer up to 70% of their mortgage payments following a sudden reduction in household income. This scheme has failed to deliver and has only helped a measly 34 families since its inception.
“However, this is only half the story and may be a wolf in sheep’s clothing as we steer ever closer to discovering the full extent of the Government’s cuts following its spending review in the autumn.
"The previous pessimistic forecast of 53,000 repossessions in 2010 and a further 205,000 slipping into arrears on their mortgage may just become a reality with Government cuts likely to affect around 600,000 jobs.
“We are already seeing the evidence of public sector cuts affecting ordinary people’s lives. Many sectors are expecting to shed around 5.5% of their workforce so the threat of redundancy, reduced hours or unpaid time is never far away. Unemployment and repossessions are inextricably linked and could get far worse if inflation and interest rates rise.
“Many analysts are forecasting that Government cuts will really start to ‘bite’ throughout the third quarter of the year and that the inevitable rise in unemployment, that the private sector will not be able to absorb, will continue for the following two years or more.
“We’ve just seen a reduction in personal debt but this was marginal and shows that, despite uncertainty in consumer spending, too many people have overstretched themselves and are laden in debt. They simply cannot afford to pay their bills and end up defaulting on their mortgage, or worse, losing their homes.”
According to various sources, UK personal debt has increased by more than £850bn in the past ten years but only decreased by £3bn in 2010. Credit Action puts the level of UK personal debt at just short of £1.46 trillion with the average adult owing just under £30K, inclusive of mortgage, or 127% of their average earnings.
Budsworth added: "2009 saw record levels of personal insolvencies - around 134,000 cases compared with only 29,000 a decade ago. 2010 could top this by some way as deeper cuts push more people into unemployment with no ability to pay their mortgage or reduce the billions of pounds of debt that has been racked up.
“Not only does indebtedness have a crippling effect on individuals, it also has serious implications on the country’s finances.
"Therefore, it’s essential that we ‘recycle’ these people, getting them back on track and making a positive contribution to the economy by paying off as much debt as they can afford, whilst being protected from creditors.
“Support for debt management plans and Individual Voluntary Arrangements (IVAs) is essential as they represent a structured way for payments to be made to all creditors, including mortgage lenders. These plans automatically prioritise payments to creditors ensuring that secured loans, such as a mortgage or rent arrears are paid and cleared first.
“For every ‘statistic’ there is a real person on an IVA or debt management plan that is determined to pay back what they can. These plans are not a ‘cop out’, they are a structured way to get that individual back on their financial feet.”
