This is the lowest quarterly number since the fourth quarter of 2007.
On an annual basis, repossessions fell from 37,300 in 2011 to 33,900 in 2012 – the lowest annual figure since 2007. This brings the rate of repossession down from 0.33% in 2011 to 0.30% last year. The stock of properties in possession held by lenders at the end of 2012 was also at its lowest for over five years.
The number of households experiencing mortgage arrears also fell. A total of 157,900 households ended 2012 with arrears of 2.5% or more of the mortgage balance, compared with 161,400 households at the end of 2011 (and 216,400 at the peak of the current arrears cycle at the end of the first half of 2009). This maintains the arrears rate at 1.4%, the same rate for the second consecutive year.
However, while the number of households in lower arrears bands has fallen fairly consistently since 2007, the number of cases in the highest band (arrears of more than 10% of the mortgage balance) increased slightly from 28,200 at the end of 2011 to 28,900 at the end of 2012.
As we have previously cautioned, higher arrears pose the greatest challenges in terms of helping households to get back on track. Early arrears can often be resolved over a reasonable timescale, especially where communication is good, but this can be more difficult when arrears have accumulated or when the household’s financial problems are long-lasting rather than temporary. Anyone facing the prospect of financial difficulty should contact their lender and take advice as soon as possible. As the statistics demonstrate, lenders try to keep borrowers in their homes and only take possession as a last resort.
CML director general Paul Smee comments:
“The fall in arrears and possessions is obviously very welcome. Households fall into difficulty for a variety of reasons, most of which cannot be anticipated. Wherever possible, lenders will work with borrowers to manage periods of temporary financial difficulty and enable them to keep their home. Anyone worried about their situation should talk to their lender, who will try to help them.”
Richard Sexton, director of e.surv chartered surveyors, commented:
Falling repossessions levels are a bellweather of an improving economy. Lenders are growing in confidence, and feel they have the capacity to support a modest growth in arrears cases, which is music to the ears of borrowers in dire financial straits. But in the long-term it’s an unsustainable strategy. If the number of borrowers in serious arrears continues to increase, which it has done for the last ten consecutive quarters, lenders will eventually have to pull the plug.
They are taking the hopeful position that borrower finances improve and arrears levels drop in the long-term. If they don’t, repossessions levels will have to increase further down the line. The imbalance between falling repossessions and increasing arrears has been growing since the financial crisis: since the end of 2008 repossessions have fallen 31% but the number of borrowers in serious arrears has increased 18%. That trend can’t last forever.