More arrears - but fewer repossessions are forecast

Arrears have shot up, but the forecast number of repossessions has been cut - and the Government announced more free debt counselling for those faced with losing their homes.

The Financial Services Authority revealed that arrears soared by over one third in the space of a year, and by 6% since last December, to reach 399,000 in the first quarter of this year.

But the Council of Mortgage Lenders has cut its forecast for repossessions for 2009 by 10,000, from 75,000 to 65,000.

It says while conditions in the housing and mortgage markets remain extremely challenging, borrowers are gaining from lower interest rates while government interventions to provide support for struggling home-owners are working.

The CML also says lenders are showing greater forbearance to borrowers, and not rushing to possess their homes. Recent Ministry of Justice figures for the first three months of 2009 show a 40% drop in lenders bringing repossession claims to court.

Meanwhile, new housing minister John Healey announced the doubling of funding, to £1.5m, for free, on-the-spot, legal advice in courts. He said the service was already proving its worth.

The money will provide extra court desks offering legal advice and representation for people facing repossessions or eviction hearings in England, building on a scheme.

But Nick Hopkinson, director of Property Portfolio Rescue, which buys up distressed properties, poured cold water on everyone's parade.

He said: "The CML's decision to revise its repossession forecast seems a little premature in the light of rising unemployment and the on-going fragile nature of our economy.

"It is evident that arrears are shooting through the roof and while these figures may not translate immediately into repossessions, any measures being taken by lenders to assist those borrowers struggling with mortgage repayments will only delay the inevitable.

"Those who can't make their mortgage repayments now will only find themselves in a worse situation next year when interest rates go up and they have even less equity in their homes.

"We are continuing to receive a growing number of inquires from sellers, desperate to sell their property in an attempt to avoid imminent repossession and I would expect to see this continue for the remainder of 2009 and into 2010 as reduced incomes leave many home owners with little choice."

He said he expected to see repossessions continue to rise for the remainder of 2009, exceeding 70,000 by the end of the year.

The CML also expects around 360,000 mortgages to be in arrears equivalent to 2.5% or more of the mortgage balance by the end of the year.

The CML's forecast for housing transactions remains unchanged, at 700,000 for the whole of 2009.


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