The proportion (and number) of borrowers behind with their payments fell across each of the arrears bands. A total of 149,400 mortgages, representing 1.33% of the entire stock of mortgages, had arrears equivalent to more than 2.5% of their mortgage balance at the end of the third quarter. This was down from 154,900 (1.38%) in the second quarter, and 159,100 (1.4%) in the third quarter of 2012.
The repossession rate also fell from 0.07% in the third quarter to 0.06% in the fourth quarter, its lowest level since the CML began publishing quarterly data at the beginning of 2008. At 7,200, the quarterly number of repossessions was also the lowest since quarterly data began - down from 7,600 in the second quarter and 8,200 in the third quarter of last year.
The CML figures cover both home-owner and buy-to-let arrears and repossessions. Arrears in the buy-to-let market are lower than in the home-owner market. While buy-to-let mortgages represent over 13% of the total number of mortgages in the UK, the sector accounts for only 9% of the total number of mortgages in arrears. However, the repossession rate is a little higher on buy-to-let than on home-owner mortgages (0.10% on buy-to-let compared with 0.06% on home-owner-mortgages). Of the 7,200 total repossessions, 1,500 were buy-to-let.
Overall, the total number of repossessions for the full year now looks likely to be fewer than 30,000, compared with the CML's start of year forecast of 35,000. And the CML's current forecast of 37,000 repossessions in 2014 will also be revised downward when the CML housing market forecasts for next year are published in December.
CML director general Paul Smee observes:
"The continued reduction in payment difficulties is obviously very welcome. Anyone who does face the prospect of difficulty can be reassured that repossession really is a last resort. By talking to their lender as soon as possible, most can resolve their temporary problems, without the lender resorting to repossession. It also makes sense for people to think ahead now to how they will manage their finances to cope with higher interest rates, and higher mortgage payments, as and when rates rise in the future.
"As the Government's mortgage rescue scheme in the English regions closes to applications at the end of March next year, we will be sorry to see it go. While the 5,000 households helped directly through mortgage rescue may seem relatively small, the benefit to those households was huge. And the scheme played a vital role in encouraging borrowers to talk to their lender, and seek free independent debt advice. Lenders remain fully committed to helping their borrowers as far as realistically possible to manage arrears if they do arise, and get back on track."
Brian Murphy, head of lending at Mortgage Advice Bureau, comments:
“Lenders and borrowers can take heart from the continuing fall of arrears and repossessions continued in the third quarter of 2013. Just 1.33% of mortgages have arrears, compared to 1.4% this time last year, while repossessions are down to 0.06%: the lowest level since the CML began publishing quarterly data at the beginning of 2008.
“The market has clearly adopted a sensible approach to approving home loans with lenders fully dedicated to responsible and sustainable lending well in advance of April 2014 when the Mortgage Market Review comes into play. The wider economy is improving faster than expected, and the prospect of an interest rate rise by 2016 at the latest means mortgage affordability will remain a vital watchword for the foreseeable future.
“Average two, three and five year fixed rates across the market are now under 4%, making mortgage finance more appealing by the day. Help to Buy 2 has also been quick out of the blocks with over 2,300 applications already approved, and all borrowers will be carefully assessed to ensure they can afford to keep up their repayments when the inevitable rate rise occurs. Current conditions clearly favour mortgage borrowers and it’s therefore more important than ever to guide people towards loans that will remain suitable and affordable in the long term.”
Richard Sexton, director of e.surv chartered surveyors, said:
“The electric economic recovery is filtering through to a dramatic drop in arrears, with homeowner arrears falling for the ninth quarter in a row; translating into a sharp decline in repossessions cases. Further homeowners have been able to pay down debt, helped by rock-bottom interest rates, which has helped airlift them out of the trouble zone.
“But the nationwide figures mask significant regional differences, with the North West and Yorkshire facing a particular battle in household finances. The North has long been dependent on public sector jobs. Job losses as a result of public sector funding being slashed, have had colossal impact on local economies, and seven out of ten Northern towns have more repossessions than average. Even equity rich London isn’t free from its share of arrears and repossessions. There are several areas in our capital where repossessions rates are alarmingly high – typically areas still affordable to first time buyers who can only just afford to buy.
“A new challenge is approaching, that could muddy the downward pattern. The bank rate, and interest rates with it, will eventually be hiked up – and sooner than predicted if the faster than expected fall in unemployment continues. This brings with it a fresh concern, a rise in interest rates could potentially push more homeowners - and particularly first-time buyers - into the red.”
