Repossession predictions were too pessimistic

Friday, 15 May 2009 10:53 AM

Repossession predictions for 2009, which were forecast at 75,000, were "pessimistic" according to the Council of Mortgage Lenders (CML).

The CML had predicted the number for the year as a whole, but have today said the forecast is not as gloomy as they had first thought, following repossession figures for quarter one (Q1) out today.

There were 12,800 repossessions by first-charge mortgage lenders, including buy-to-let, in Q1, compared with 8,500 for the same quarter last year.

Although the number of repossessions were rising, the CML was optimistic their first forecast for the year had been too disparaging, and will be revising the figure in their next housing market forecast update.

CML director general Michael Coogan said: "Despite technical issues this quarter affecting our ability to compare arrears and possession rates with earlier periods, it is clear that mortgage arrears continued to increase. So did repossessions, but not as much as our 75,000 forecast figure for the year would suggest.

"So our forecast now looks pessimistic and we expect to revise it over the next month or so. Lenders are acutely conscious that behind the statistics are real people, many of whom are affected by the economic downturn and its impacts on unemployment, changes in circumstances and inability to refinance."

The Ministry of Justice also published its figures on repossessions today, discovering that in Q1 there were 22,609 mortgage possession claims issued on a seasonally adjusted basis, which was 42 per cent lower than for the same quarter in 2008. The number of mortgage possession orders was also down and 47 per cent of orders were suspended.

This suggests fewer households struggling with their mortgages are ending up in court - leading hopes future actual repossession figures will fall.

The number of mortgages in arrears continued to rise on all measures, the CML said, however, they outlined that the "number of months" measure is disproportionately affected by the very low interest rate environment at present.

Mr Coogan added: "Lenders genuinely want to help borrowers where borrowers are committed to working with them. It is quite clear that the number of arrears cases is rising far more markedly than the number of repossessions.

"Lenders are demonstrably increasing the forbearance they are offering, while many struggling borrowers have gained some breathing space through lower interest rates feeding through to lower monthly payments. The government has strengthened the benefits system, and while initiatives such as mortgage rescue and the home-owner mortgage support scheme are not appropriate for everyone, they have encouraged more borrowers to discuss their options with lenders and money advisers, which is helpful.

"The key message continues to be: talk to your lender as soon as you identify difficulties emerging, and take advice from an independent money adviser if you have other debt issues as well as your mortgage. Lenders do not want to repossess if a realistic alternative solution can be found."

Figures were also published today from the Finance and Leasing Association (FLA) which show second charge lenders are attempting to avoid making repossessions. The FLA director general Stephen Sklaroff, said: "Our figures show a continued low level of repossessions. Second charge lenders recognise the pressures that many people face in the midst of recession.

"It is to their credit that the number of repossessions has remained almost flat compared to the same period last year. Our Good Practice Guidelines will continue to help homeowners in difficulty."

Following the release of the CML figures, David Brown, commercial director at LSL Property Services, said: "The rise in the number of people falling behind with their payments and losing their homes comes despite rock bottom interest rates and government initiatives to keep people in their homes. Rising unemployment has worsened the situation as people lose their main source of income.

"Unfortunately the picture is likely to get worse as unemployment will rise for some time yet, and interest rates will have to go up again in the next few months as the economy begins to come off life-support."

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