Arrears and Repossessions

Data released by the Council of Mortgage Lenders (CML) has presented a mixed picture on arrears and possessions.

At 8,410, the number of properties taken into possession is the first six months of 2006 was the highest since the first half of 2001. But the rate of growth of long-term arrears declined, and shorter-term arrears fell, suggesting that the outlook is not necessarily one of rising possessions.

This month’s rise in interest rates – and the possibility that rates will trend further upwards – will add to payment difficulties for hard-pressed borrowers at the margins. But the CML says that a rise in rates had been expected and was factored into its forecasts for this year and next.

Most new borrowers are protecting themselves from fluctuations in borrowing costs by opting for fixed rates.

And many due to come off maturing fixed-rate deals this year and next may actually find that rates are lower than when they took out their last loan. This month’s rise in interest rates may have a modest effect over time but the CML has left unchanged its current forecasts for possessions in 2006 and 2007.