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CML admits mortgage arrears will rise

The Council of Mortgage Lenders says mortgages in arrears will exceed previous predictions by the end of the year.

The number of cases in arrears at the end of September was 168,000, a rise of 8 per cent in just three months. The CML says as a result of these statistics, the number of households in arrears by the end of the year is likely to exceed the previous CML forecast of 170,000.

The CML reports that 1.44 per cent of mortgages were at least three months in arrears as at the end of September 2008. This was up from 1.33 per cent at the end of June.

The CML also found there were 11,300 repossession in Q3 2008, 12 per cent higher than the 10,100 in the second quarter. The CML continues to expect the total number of repossessions this year to be around 45,000, as forecast in October 2007.

Buy-to-let mortgages worsened more rapidly than the market as a whole. The CML says reasons for this include falling rents and an over-supply of rental property in some areas, resulting in some landlords being unable to let their property or achieve high enough rents to support their borrowing commitments. It says fraud is also likely to have been a contributory factor.

In addition, in line with the rest of the market, it is more difficult to sell as an exit strategy, while the availability of new buy-to-let mortgage finance has contracted and criteria have tightened. At the end of September, 1.58 per cent of buy-to-let loans were in arrears, up from 1.10% at the end of June, compared with 1.44 per cent of all mortgages.

The council says buy to let repossessions will remain lower than residential figures thanks to the nature of the mortgage – buy-to-let lenders can appoint receivers of rent as an alternative to repossession.

CML director general Michael Coogan said: “The CML and lenders are absolutely committed to ensuring that repossession is only ever a last resort. Most borrowers who face payment problems successfully keep their home by working with their lender – anyone worried about mortgage payments should contact their lender at the earliest opportunity, before arrears start to build up.

“The government has taken some helpful steps towards targeted support for some of the most vulnerable households, but with a worsening economy now needs to make it a priority to go further.

“Next week’s pre-Budget report should concentrate on making much more assistance with mortgage payments available for people whose income is reduced, as help is currently far too limited.

“Looking ahead, conditions in the wider economy suggest a worsening picture for mortgage arrears, however carefully lenders handle their treatment of borrowers in difficulty. But while lenders cannot change the underlying causes of financial difficulty, such as unemployment, they can make sure that their response to borrowers is constructive and seeks to avoid repossession wherever other solutions can be found.”


A family affair

At this time of year, any adviser of corporate clients with calendar year ends (and there will be a lot of them) should be thinking very carefully about managing the year-end planning strategy.


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