Fewer property repossessions in 2007 than forecast

Friday, 8 February 2008 12:00 AM

Fewer than one in 400 mortgages resulted in repossession during in 2007, according to figures from the Council of Mortgage Lenders (CML) released today.

The repossession rate stood at just 0.23 per cent for the whole of 2007 - less than half the rate experienced at the low point of the early 1990s.

This figure is also substantially lower than the one forecast by the CML.

At the height of the credit crunch the organisation - which represents lenders accounting for 98 per cent of all lending in the UK - forecast there would be 30,000 repossessions during 2007.

However, the final tally was 27,100.

And while this is well below the expected level the figures has increased since the remarkable low of 10,000 repossessions recorded in 2003 and 2004.

Furthermore, fewer than half of one per cent of all mortgages had accumulated arrears of more than six months at the end of 2007.

This level is again virtually the same as the figure recorded in 2006, and around a seventh of that recorded in the early 1990s.

The CML argues the fall in repossessions is due to improved lending practices from mortgage providers.

"Lenders take their responsibilities to borrowers facing repayment difficulties very seriously, and many go to exceptional lengths to provide debt counselling, reschedule payments, extend loan terms, or in some circumstances even allow payment breaks," said CML director general, Michael Coogan.

"They abandon repossession action right up to the last moment if they can reach a payment solution consistent with both the borrower's and the lender's interests."

Predicting the number of repossessions in 2008, however, will be tricky, according to CML.

While the rumbling effects of the credit crunch may still be felt, they will be muted by a falling base interest rate.

"Despite this, the number of repossessions is likely to be higher in 2008 as a result of wider issues in the economy and the mortgage funding markets," continued Mr Coogan.

"No-one is necessarily to blame for this - even the best risk assessment cannot provide a crystal ball insight to the future for each particular borrower."

However, in a note of caution, Howard Archer, of analysts Global Insight, said: "The financial pressure on many home owners is increasing, and it seems certain repossessions will trend up significantly during 2008, particularly if the economy suffers an extended marked slowdown and unemployment starts rising."

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