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Repossessions fall as low rate cushions households.

Byline: Vicky Shaw Press Association personal finance correspondent

THE number of home repossessions last year was at the lowest level since 2006, the Council of Mortgage Lenders (CML) has reported.

Some 21,000 repossessions took place in 2014, a 26% fall on the previous year, as low interest rates and cheap mortgage deals helped to cushion households from getting into financial difficulty.

Of the repossessions recorded last year, 16,100 were on owner-occupied homes and 4,900 on buy-to-let properties.

The CML said the main drivers of people getting into difficulty with a mortgage tend to be an income shock such as unemployment and interest rates, which influence the cost of borrowing.

Both of these factors are "relatively benign" at the moment, the CML said.

Repossession rates on buy-to-let mortgages tend to be higher than on owner-occupied loans, because lenders tend to make particularly strong efforts to help owner-occupiers keep a roof over their head.

CML director general Paul Smee said: "The relatively low rate of repossession among owner-occupiers - around one in 600 mortgages last year - should help to reassure borrowers that, if they do face payment difficulties, lenders will work with them to try to resolve their problems. Repossession is only ever a last resort."

A mortgage price war which broke out between lenders last autumn has continued to intensify this year, with an avalanche of lenders chopping their rates to record lows.

But looking ahead, the CML said lenders are "very aware" that some increased pressure will be put on households' finances if interest rates start to rise.

Mr Smee continued: "No one should be lulled into a false sense of security that the current low interest rates we are experiencing will last forever, though.

"Rules are in place to ensure lenders assess future affordability, but these are not a substitute for careful borrowing.

"It is essential for borrowers themselves to have one eye on the future. Think through any borrowing taken on now to ensure it will still be affordable if and when rates rise."

Toughened mortgage lending rules were introduced in April last year, which force lenders to make sure that mortgage applicants can not only afford their home loan now, but also when interest rates start to increase.

In recent years, concerns have been raised about people who are on an interest-only mortgage, with fears that many have not put sufficient plans in place for how they will pay off their mortgage once the deal comes to an end.

Mortgage lenders have been contacting borrowers to make sure plans are in place and have said good progress has been made.

The CML's figures also show that there were fewer mortgages in arrears at the end of 2014 than at any time since 2006. Some 1.05% of all mortgages were in arrears, equivalent to 2.5% or more of the mortgage balance, down from 1.29% at the end of 2013.

Even in the most severe arrears bracket, there was also a fall. There was a 14% year-on-year decline among those who had arrears of more than 10% of the balance, with 24,700 such cases recorded at the end of 2014.

Jonathan Harris, director of mortgage broker Anderson Harris, said: "Repossessions continue to fall, while the number of borrowers in arrears has also declined. This is to be expected with rock-bottom interest rates and improving employment numbers, as well as lenders prepared to be flexible and show forbearance.

"However, there are still tens of thousands of home-owners being repossessed each year, which begs the question: what will happen when interest rates do start to rise? How will people cope? "We suspect that when it comes to their finances, there are many people 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."


Of the repossessions recorded last <B year, 16,100 were on owner-occupied homes and 4,900 on buy-to-let properties
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Title Annotation:Business
Publication:Western Mail (Cardiff, Wales)
Date:Feb 18, 2015
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