Additional figures from the Council of Mortgage Lenders also found a fall in the number and proportion of mortgages in arrears or ending in repossession in Q1.
A decline was experienced in all arrears bands, and across both owner-occupier and buy-to-let lending.
The total proportion of all mortgages with arrears equivalent to more than 2.5% of the mortgage balance was 1.03% at the end of the first quarter. This was down from 1.05% in the fourth quarter of 2014, and well down on the 1.24% recorded at the same time last year.
In numerical terms, there were 113,900 loans in arrears. Of these, just 24,400 were in the most severe arrears band (more than 10% of balance), equating to 0.22% of all mortgages. This is the smallest number and proportion of mortgages in the most serious arrears band since the end of 2008.
Fiona Hoyle, Head of Consumer Credit at the FLA, said:
“Second charge repossessions are continuing to fall as second charge lenders continue to do all they can to help customers in financial difficulty.”
CML director general Paul Smee said:
"Although complacency would be misplaced, the underlying picture continues to be one of improvement and a continuing reduction in mortgage arrears and repossessions."
However, industry experts have expressed concern over repossession figures when interest rates begin to rise.
Brian Murphy, Head of Lending at Mortgage Advice Bureau, commented:
“The low interest rate environment has played a big role in reducing cases of arrears and repossessions among mortgage borrowers. Today’s data shows the picture continuing to improve and suggests that, on the whole, households are increasingly comfortable with managing their borrowing commitments without falling into difficulties.
“The big challenge for industry will be to keep arrears and repossessions low with a higher base rate to contend with. Yesterday’s notice from the Bank of England of a potential rate rise in early 2016 still gives mortgage holders plenty of time to review their current deals and lock into low rates if it suits their circumstances.
“Affordability checks will be a big help in making sure new borrowing commitments don’t tip household budgets over the edge when rates start to climb. If borrowers find their repayments become harder to manage, they should not hesitate before contacting their existing lender or exploring wider options with the help of a broker.”
Jonathan Harris, director of mortgage broker Anderson Harris, added:
"Repossessions continue to fall, while the number of borrowers in arrears has also declined. This is not altogether surprising with rock-bottom interest rates and improving employment numbers, as well as lenders prepared to be flexible and show forbearance.
"However, there are still thousands of homeowners being repossessed each year, which begs the question: what will happen when interest rates do start to rise? How will people cope? Even though we have had a benign interest rate environment for some years now, there are likely to be people whose finances are teetering on a knife edge and rate rises could easily push them over.
"Interest rate rises are inevitable at some point; when they come, they must do so gradually. Thankfully the Bank of England has suggested that this will be the case.
"Nevertheless, borrowers must keep their lender in the loop if they are struggling with their mortgage. It is much easier and less stressful to come up with solutions early on than further down the line when the options may be much more limited."
