Lenders fear rise in repossessions

To Let signsBritain's lenders have warned that repossessions are predicted to rise next year and the amount of money lent for mortgages could be lower amid a weak economic backdrop.

The Council of Mortgage Lenders (CML) predicted that repossessions will go up from an estimated 37,000 this year to 45,000 next year. But it said this would still be "far lower" than the downturn in the 1990s, and also lower when compared with the 47,900 repossessions in 2009.
The number of mortgages in arrears is also expected to increase after falling back for two years, from an estimated 166,000 with arrears of 2.5% or more of the outstanding balance this year, to 180,000 next year.

CML officials confirmed they expect gross lending this year to total £138 billion, up from £136 billion last year.

But it predicts that lending will fall back to £133 billion in 2012, amid pressure on household budgets and concerns that the fallout from the eurozone crisis could affect the cost and availability of mortgages.

CML chief economist Bob Pannell said: "The weak state of the wider economy and household finances creates a challenging and highly uncertain backdrop for the housing and mortgage markets.

"Despite the fact that activity levels have already been subdued for several years, we have pencilled in a broadly flat picture - for both mortgage lending and property transactions - at least until real incomes show signs of stabilising as inflationary pressures recede."

The CML said it expects housing transactions to remain low, falling from an estimated 852,000 transactions this year to 825,000 in 2012.

The body made its forecasts as it said that gross mortgage lending in November totalled around £13 billion, with the monthly figure showing its fourth consecutive year-on-year rise. This figure is 5% higher than in October and represents a 13% rise on the same period last year.

Mr Pannell said: "If European leaders navigate a comprehensive and sustainable way through eurozone problems, current financial market stresses could heal - and the previous pattern of gradual improvement in cost and availability of funds re-emerge - relatively quickly."
© 2011 Press Association
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