Further decline in mortgage arrears and possessions in the UK

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The Council of Mortgage Lenders (CML), a UK trade association for the mortgage lending industry, revealed on Thursday that there was a further decrease in mortgage arrears and possessions during the second quarter of 2014, with the overall total now at its lowest since the first quarter of 2008.

At the end of June this year, mortgages in arrears of 2.5% or more of the balance decreased to 131,400, which represented 1.18% of all mortgages. Three months earlier the figure stood at 138,200, or 1.24% of all property loans. During the second quarter of 2013 there were 154,900 mortgages in arrears, 1.38% of the total of UK mortgages. According to CML data, the numbers in all arrears bands were shown to have declined.

Properties taken into possession totalled 5,400, representing 0.05% of all loans, in the second quarter of 2014. This number dropped from 6,400 in the first quarter and 7,600 a year ago. Cases of possession are the lowest since the second half of 2006, numbering 11,800, in the first half of this year.

Figures for the buy-to-let sector are included in the total published by CML, which indicate that this sector has also continued to decline. Buy-to-let mortgages in arrears of three months or more stood at 13,400 at the end of June, including cases in which a receiver of rent had been appointed. This was a fall from 14,700 reported in the previous quarter and 17,900 in the second quarter of 2013. There were a total of 1,300 buy-to-let properties taken into possession in the second quarter, compared to 1,400 in the first quarter.

CML added that its data is broadly in line with its revised forecast that there would be 135,000 mortgages in arrears at the end of 2014, down from 150,000. CML had also forecast that cases of possession would drop from from 28,000 to 25,000 during the year.

Director general of CML, Paul Smee commented: “Another fall in arrears and possessions is clearly welcome and shows that borrowers, lenders and money advisers are generally continuing to work well to contain payment problems where they arise, helped by an improving economy and low interest rates. But rates will rise at some stage, of course, and borrowers should be planning for that now.

“We welcome the message from the Bank of England that, when it raises rates, it plans to do so in a series of ‘baby steps’, matched to a careful assessment of the ability of households to deal with higher borrowing costs. Any borrower anticipating payment problems should talk to their lender as soon as possible. Today’s figures continue to show that in many cases it is possible to work through a period of difficulty, with lenders committed to helping borrowers get their finances back on track.”

The Council of Mortgage Lenders is comprised of banks, building societies and other lenders, which together are responsible for around 95% of all residential mortgage lending in the UK. There are currently 11.1 million mortgages in the UK, with loans worth over GBP1.2trn.

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