The latest figures show mortgage arrears and repossessions have fallen, but we're not out of the woods yet
More homeowners are hanging onto their properties, according to the latest repossession figures from trade body the Council of Mortgage Lenders.
The number of properties taken into possession dropped by 13% to 10,200 between quarter three and quarter four of 2009. Over the whole year 46,000 properties were repossessed -- a 14-year high.
As awful as this is for the thousands of families that lost their homes, it is significantly lower that the CML's initial prediction of 75,000 repossessions in 2009. Thank goodness they were wrong.
There was also a drop in the number of mortgage borrowers having difficulty meeting their monthly repayments, with 188,300 mortgages ending the year in arrears of 2.5% of the outstanding mortgage balance (i.e. £2,500 or more arrears on a £100,000 balance).
Positive trend
More good news came from the Ministry of Justice, showing that court activity for repossessions in 2009 dropped by over a third compared with 2008, and claims for mortgage possession by lenders between October and December 2009 were 26% lower than during the same period last year.
Of the mortgage possession claims that led to orders, 46% were suspended.
Housing Minister John Healey said that measures to help struggling homeowners will remain in place after Government figures showed that thousands have received free advice about their mortgage repayments from their local authority.
In the last three months over 9,000 cases facing legal action were seen by court desk advisers, of which over 7,500 had the immediate risk of losing their home lifted.
The Government's Mortgage Rescue Scheme helped 1,200 households stop the immediate threat of repossession, with a further 544 accepting an offer from a Registered Social Landlord to sell and rent back their property so they could stay in their homes.
It's important to stress that the Government sale-and-rent-back option is completely separate and different to the schemes offered by private companies, discussed by lovemoney.com writer John Fitzsimons in his piece OFT showing its teeth on sale and rent back.
Buy-to-let fares better
The buy-to-let sector performed even better, showing greater reductions in arrears and possessions over the last three months of 2009, according to the CML.
It said that the number of buy-to-let properties taken into possession in the fourth quarter fell by 25% compared to quarter three. Overall in 2009, there were 5,700 possessions (0.46% of buy-to-let mortgages), roughly on a par with the 0.42% annual possession rate for the wider mortgage market.
However, there is another important option for lenders when it comes to dealing with landlords in arrears and this can minimise the repossession figures.
By appointing a Receiver of Rent, which collects the rent directly from the tenants on behalf of the lender, the landlord can avoid repossession and the lender gets back the money it is owed. Receivers of Rent were appointed on 8,600 properties in 2009, representing 0.70% of all buy-to-let mortgages.
Even the second charge market, which lovemoney.com writer Neil Faulkner warns against in Beware these high risk homeowner loans, has seen a drop in possessions.
Figures released last week by the Finance & Leasing Association (FLA) show that second-charge mortgage lenders took possession of almost 10% fewer properties in 2009 than in 2008. Indeed, in the last quarter of 2009 there were just 233 possessions compared to 411 in quarter three.
So things are improving in the mortgage market, right?
Not necessarily.
Risk of rises
Despite the downward trend in arrears and repossessions many expect they could rise again in 2010. Even the CML expects repossessions to increase this year from 46,000 to 53,000. Last week it remarked that this forecast might now look a little pessimistic, especially because of lenders being more flexible, interest rates looking likely to remain low, and better than expected unemployment levels.
But the trade body didn't actually go as far as revising its prediction and it covered itself saying that because 'both the economic and political outlook remains uncertain, interest rates may rise sooner than we expect'.
The worry is that when rates do rise it's almost certain arrears and repossessions will follow.
There is even more concern in the buy-to-let sector according to the annual Moore Blatch 2010 Repossessions Report, which compiles the views of lenders and asset managers.
It says that 65% of mortgage lenders are worried about an increase in buy-to-let repossessions if rental yields reduce and 56% fear an increase if there were to be a rate rise.
Another worry is the fact that landlords are struggling to pay their mortgage because their tenants are not fulfilling their rent obligations. According to the Assocation of Residential Letting Agents, 55% of letting agents have seen an increase in tenants struggling to pay their rent.
The organisation warned that 'we must not labour under illusions, as the threat to the property market is ongoing and very real'.
There has been a raft of measures introduced in the last 18 months to protect struggling homeowners and there are more proposals in the pipeline to ensure that every protection is afforded to borrowers.
Things seem to be improving, but with the economy in such a fragile state nobody knows quite what 2010 will bring.
If you are struggling to pay your mortgage or think you might do in the future, talk to your lender in the first instance. It's also worth checking out www.direct.gov.uk/mortgagehelp for details of Government support and assistance.
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