CML reduced for home repossession

Fewer homeowners are expected to face repossession this year than originally predicted, the Council of Mortgage Lenders (CML) said today.

The CML reduced its forecast for the total number of repossessions in 2009 from 75,000 to 65,000 to reflect the benefits of lower interest rates, government intervention and forbearance by lenders in cases where borrowers are struggling with repayments.

Despite rising levels of unemployment, the CML said that lower borrowing costs had made it easier for households who suffer a loss of income to continue to pay their bills. It still expects a rise in the number of borrowers falling behind with their repayments, but at a slower pace than previously expected.

The latest forecast is in line with separate data from a recent survey by the National Association of Estate Agents seen by The Times, which said that 80 per cent of its members had not seen a rise in the number of repossessed properties on their books.

Of the 20 per cent that had seen a rise in the number of repossessions, four out of five said that they had seen a 10 per cent rise in their stock of repossessed property.

The CML said that it now expects about 360,000 mortgages to be in arrears of 2.5 per cent or more of the outstanding mortgage balance at the end of this year, up from 182,600 at the end of 2008 but 15 per cent fewer than it had previously expected.

This prediction expects that 425,000 borrowers will be more than three months in arrears at the end of this year — lower than the CML's previous forecast of 500,000.

Despite the improved outlook, the industry body believes it is still too early to say that the housing market is in recovery, adding that the lending industry still faces "considerable" challenges in increasing the supply of mortgage credit and warning borrowers that there was as yet "no rationale" for relaxing the mortgage criteria. Harsher lending rules have thwarted many homeowners hoping to remortgage as well as prospective buyers of new homes.

In light of the lack of remortgage activity, the CML said that it expected lending to stagnate for the rest of the year, falling by £5 billion by the end of 2009. It had previously predicted a more pessimistic £25 billion contraction.