CML say the rate of repossessions is easing

Fewer homeowners are expected to face repossession this year than had been feared because there is less pressure on people struggling with mortgage repayments, according to a forecast from the Council of Mortgage Lenders (CML).

The CML said that it had revised down its original expectation that 75,000 houses would be repossessed in 2009 to 65,000 to take into account lower interest rates, government intervention and lenders’ forbearance.

The industry body also reduced its estimate for the number of homeowners who would be in arrears of three months or more by the end of the year from 500,000 to 425,000. It added that unemployment would mean that the number of borrowers struggling to meet repayments would continue to increase from last year’s levels, albeit at a slower pace.

The renewed optimism from lenders came as the Department for Communities & Local Government said on Monday that it would double to £1.5 million the funding for free legal advice to those facing repossession.

Other housing data released on Monday gave a mixed view of the market’s fortunes. Figures from the Financial Services Authority (FSA) showed a 62 per cent increase in repossessions, from 9,174 in the first quarter of 2008 to 14,825 in same period this year, and a 33 per cent rise in arrears, from 299,588 to 398,991.

In an apparent contradiction of the CML’s view that lenders are being more helpful to struggling customers, the FSA said it had found a number of sub-prime lenders and third-party administrators guilty of poor practice in the handling of arrears and repossessions cases.

The watchdog said that it would take legal action against four groups and was assessing others for being too quick to take court action, unfairly imposing fees and not taking borrowers’ circumstances into account. Meanwhile Shelter, the housing charity, said that a second wave of repossessions could hit the UK in the next two years as unemployment rose, interest rates began to climb again and mortgage support schemes came to an end.

Figures from the Royal Institution of Chartered Surveyors (RICS) made further grim reading for landlords, but will prove gratifying for tenants. RICS reported that the number of surveyors reporting a fall rather than an increase in rents rose from 48 per cent to 55 per cent, the highest proportion since it began the survey in 1999. Landlords’ gross property yields were falling for the first time since April 2007, indicating that rents were declining at a faster pace than house prices.