House repossessions set to fall


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The number of people sinking into such severe mortgage debt that they lose their home is expected to continue a trend of "modest improvement" in figures released tomorrow.

The Council of Mortgage Lenders (CML) will release repossession figures for the third quarter of this year, after those for the first six months of 2013 showed the lowest half-yearly total since 2007.

Ultra-low interest rates and Government schemes such as Funding for Lending and Help to Buy have helped to keep mortgage payments relatively affordable despite other pressures from such things as soaring fuel bills and stagnating wages.

Recent figures released by the Bank of England showed that the typical interest rate taken out by borrowers on new mortgages in the second quarter of this year dropped to a new low of 3.47%.
But fresh concerns have also been raised about how long borrowers will be able to continue benefiting from these low mortgage payments for after a report by the Bank suggested that an earlier-than-expected rise in interest rates could be on the horizon.

Ed Stansfield, chief property economist at Capital Economics, said of tomorrow's CML figures: "I would expect a modest improvement."

Mr Stansfield said that bearing in mind some improvements to the labour market, signs that lenders are exercising forbearance and mortgage arrears levels falling it would be "hard to see" a break away from the downward trend in repossessions.

The CML's most recent figures showed there were 15,700 repossessions in the first half of 2013, marking the lowest six-monthly figure seen since the second half of 2007.

There were 7,700 repossessions in the second quarter of this year, which was almost 4% lower than the 8,000 recorded over the post-Christmas period in the first three months of 2013.

The CML has not adjusted a forecast it made last December that repossessions for the whole of this year will remain at around 35,000, putting them at levels similar to a five-year low recorded across 2012.

But if the pattern for the first six months of the year is repeated in the second half, the total number of repossessions in 2013 would come in well below its prediction, at just over 31,000.

The Bank of England base rate has been kept frozen at its historic 0.5% low for more than four and-a-half years, but experts have warned borrowers to brace themselves for an upturn in their costs after the rate increases.

The Bank has pledged not to raise the rate before unemployment falls to 7% . While unemployment is not expected to fall to this key threshold before the end of 2016, the Bank's quarterly inflation report said the chances of this happening sooner have increased amid signs that the economic recovery has "finally" taken hold.

Mark Harris, chief executive of mortgage broker SPF Private Clients, suggested borrowers could consider locking into a longer-term fixed rate mortgage if they are concerned about their ability to continue affording their mortgage payments.

He said: "Borrowers should not panic. If you are really concerned about the potential of an early rate rise and being able to afford your mortgage, then it makes sense to opt for a fixed rate.

"Fixing for five years may cost slightly more than two years but gives peace of mind for longer and removes the need to remortgage in a couple of years just when rates might be about to rise."

Many homeowners will have seen the value of their property increase in recent months as Government schemes have improved mortgage availability and injected fresh demand into the housing market from would-be home buyers.

House prices reached an all-time high in August, according to Office for National Statistics figures. In London, prices are up by 9% year-on-year, although prices in Scotland, Wales and Northern Ireland are still well below the peaks seen in the property boom.

The CML's most recent figures showed that t he number of mortgages in arrears fell to its lowest levels since autumn 2008 in the second quarter of 2013. At the end of June, a total of 157,700 mortgages, equivalent to 1.4% of all loans, were in arrears of 2.5% or more of the balance.

The body advises people struggling with their mortgage payments to tell their lender immediately, seek help from a free, independent debt advice agency and check whether they can get help from an insurance policy or a state benefit scheme.