(The Guardian) [UK] House repossessions fall 4% but CCCS sounds warning

The number of house repossessions fell 4% in the second quarter, but debt advice charity CCCS sees the picture worsening

The number of homes repossessed is expected to rise later in the year. Photograph: David Levene for the GuardianThe number of homes taken into possession by lenders remained relatively stable in the second quarter, according to figures published by the Council of Mortgage Lenders (CML), but the figure is expected to rise again later this year.

There were 9,400 repossessions between April and June, down 4.1% from 9,800 in the first quarter and 20% less than the 11,800 in the second quarter of last year.

The number of mortgages in arrears also fell: at the end of June there were 178,200 loans with arrears equivalent to 2.5% or more of their mortgage balance, 5% less than at the end of March and 17% lower than a year ago.

The encouraging decline means CML now expects 175,000 mortgages to end the year 2.5% or more in arrears compared with a previous forecast of 205,000. A total of 39,000 repossessions is forecast for 2010 against a previous estimate of 53,000.

However, the CML warned that the number of borrowers who are further behind with their payments (arrears of 10% or more) has fallen by less than those with smaller arrears. It says this could suggest those borrowers’ arrears may have been stabilised through lender forbearance or other support, and that their situation has not improved enough to enable them to claw their way out of problems.

“These finely-balanced arrears cases are the ones who may be at most risk of tipping into repossession if there are negative changes such as higher interest rates or reduced benefit support,” it said.

CML director general Michael Coogan said: “Mortgage difficulties have so far been contained at lower levels than we expected at the start of the year, and by comparison to the 1990s recession.

“However, the safety net for borrowers is weakened by the prospect of higher interest rates, a possible rise in unemployment, a counter-productive stigma hanging over mortgage payment protection insurance, uncertainty over future debt advice funding, reduced government support for mortgage payments and mortgage rescue schemes being reviewed as part of the deficit reduction plan.

“While we don’t want to cry wolf, it seems obvious the ongoing prognosis for arrears and possessions is far from a healthy all-clear. We hope the coalition government will not risk undermining the chances of extending the welcome trends this year by removing support mechanisms that work.”

Although national debt charity the Consumer Credit Counselling Service (CCCS) welcomed the continued decline in repossessions, it warned that a rise was likely during the next year.

The CCCS said it counsels a large number of clients with suspended repossession orders on their homes which lenders have chosen not to enforce, despite clients failing to meet court stipulated payments. It believes that a housing market recovery may lead to an increase in the number of repossessions as lenders enforce suspended possession orders after previous leniency.

This situation is likely to be aggravated in October when Support for mortgage interest payments for those who have lost their jobs are reduced from 6.08% to 3.09%, to match the Bank of England’s average mortgage rate.

Malcolm Hurlston, CCCS chairman, said: “There is no doubt that lenders have shown leniency towards debtors during the recession by not enforcing suspended possession orders. However, this leniency may have been partly determined by the markets.

“In addition, some lenders are increasingly showing reluctance in allowing struggling debtors to switch to interest-only mortgages as a short-term solution, giving people the necessary breathing space to find other more sustainable options.”

http://www.guardian.co.uk/money/2010/aug/12/home-repossessions-fall-cccs-warning