The number of homes repossessed by lenders in the UK dropped by 24% to 36,300 last year, according to the Council of Mortgage Lenders (CML).
The final three quarters of 2010 saw 1,000 fewer repossessions compared to the previous quarter with evictions dropping from 8,900 to 7,900. This was the fifth consecutive quarterly fall since repossessions peaked in 2009.
The CML had previously predicted that 53,000 homes would be repossessed during 2010. Their forecast was revised down after repeated quarterly falls.
The number of homeowners in arrears of 2.5% or more of their outstanding loan value also fell last year, by 13% to 169,600.
Low interest rates, government schemes designed to help homeowners struggling to meet their monthly repayments and greater tolerance from lenders have helped to keep people in their homes despite the fact that personal insolvencies are again on the rise. Banks have been less keen to move to evict homeowners in light of the current economic situation and the negativity felt towards the sector.
The CML expects the trend to be reversed over the course of 2011 however as the effects of the government’s spending cuts start to be felt and interest rates rise.
Michael Coogan, the CML’s director general, said: “Lenders are continuing to work hard to help their borrowers who face temporary financial difficulties.”
He added: “As we go through 2011, the number of people facing payment pressures may increase if interest rates rise, and as a result of the spending cuts that have resulted in reductions in the level of public support available,”
“We will be monitoring developments closely, but at present we continue to expect the number of arrears and repossessions to be in line with our forecasts of 40,000 repossessions and 180,000 arrears cases as at the end of 2011. Anyone who is worried about being unable to pay their mortgage should contact their lender and seek advice at an early stage from Citizens Advice, Shelter, National Debtline or other local advice agencies.”
Experts predict that many homeowners will be pushed over the edge over the coming year with flat wage growth, rising unemployment and high inflation contributing to an increase in the number of repossessions.
David Birne, insolvency partner at HW Fisher & Company chartered accountants, said: “A big saviour for many households has been the low interest rate environment. Rates have been at record lows for an inconceivably long time, but at some point this will end. When rates do rise, and inflation may force the Monetary Policy Committee’s hand sooner rather than later, the number of repossessions and people in arrears could spike sharply.”
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