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Sub-prime will spark a big repo rise, says CML

The Council of Mortgage Lenders believes the boom in specialist mortgages will see repossessions soaring by 46 per cent this year but admits it does not have credible data.

Internal documents circulated at the CML show it is concerned it does not have the necessary data on the sub-prime and non-conforming parts of the market, including self-cert mortgages, to be taken seriously as an informed commentator.

It is forecasting the dramatic rise in repossessions because lenders in the ever-expanding sub-prime, self-certification and buy-to-let markets are taking a tougher stance on arrears. The second-charge loan market is also said to be accounting for more repossessions.

The figures represent a huge rise on February’s repossession risk review from the CML which predicted a 16 per cent increase. It says any interest rate rises could further increase repossessions.

The CML predicts that repossessions will rise from 10,310 in 2005 to 15,000 this year and remain at that level until 2008. This compares with a 2006 forecast of 12,000 in February.

If proved correct, the repossession figures would be the highest for several years but still well below 1991 figures, which peaked at 75,000 during the recession.

CML senior economist Jim Cunningham and head of research and information Bob Pannell told the trade body’s executive committee last week in a memo: “The proportion of mortgages in long-term arrears moving to possession has more than doubled since 2004 and is at its highest since the early 1990s.

“This is consistent with lenders taking firmer action and there are more cases of second-charge lenders taking possession. It is also consistent with the growing importance of specialist lending when lenders take firmer action with defaulters. Rises in arrears might reflect maturing portfolios following earlier rapid growth.”

In a separate document, CML head of external relations Sue Anderson says: “There is a widespread belief that we have something to hide and that we do not understand these newer parts of the market. Until we deal with this, these perceptions will remain.

“We effectively have no publicly available data on the non-conforming and sub-prime sectors and on the vol-ume of self-certified business.

“Our lack of ability to use data to support assertions is a major hindrance in being taken seriously as an informed commentator.”

London & Country head of communications David Hollingworth says: “The repo figures sound frightening but hopefully the predictions will not come true.”

HBOS intermediaries managing director Nigel Stockton says: “The figures are still nowhere near the levels of the late 1980s and early 1990s.”

The CML is scheduled to publish data on repossessions and arrears at the end of this week.


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