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Short-term mortgage arrears on increase

Short-term mortgage arrears have shown their first significant increase since 1998, according to figures from the Council of Mortgage Lenders.

The repossession risk review shows short-term arrears of three to six months rose by 9.5 per cent to 53,960 in the second half of 2004 from 49.270 in the first half.

But the figures remain historically low. When the CML began collecting short-term arrears’ data in 1994, there were nearly 190,000 cases in the first half of that year. The current set of figures is the third lowest on record.

The number of repossessions remains low, with 3,070 properties taken into possession during the second half of 2004 compared with 3,160 in the first half and 3,610 in the second half of 2003.

The number of long-term arrears’ cases (more than six months) also remains low. There were 38,130 cases of arrears in the second half of 2004 compared with 38,640 in the first half and 41,880 in the second half of 2003.

The CML concedes that the rise in short-term arrears will feed through into longer-term arrears. The report says that interest rates are at or near their peak but the full impact of last year’s rate rises are unlikely to have completely fed through to arrears yet.

Director general Michael Coogan says: “With short-term arrears now increasing, we are bound to see a rise in longer-term arrears and possessions following behind, although we do not expect a dramatic increase.”

Monument Securities chief economist Stephen Lewis says: “I would not think that possession is going to affect the course of house prices.At the moment, house prices are moving sideways. Unless unemployment rises or there is a significant rise in interest rates, this looks unlikely to change.”

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