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The number of home repossessions in the UK fell 26% in 2014 compared to the previous year, the lowest since 2006, according to the latest data from the Council of Mortgage Lenders (CML). Out of the 21,000 total number of repossessions, 16,100 were on owner occupied properties, and 4,900 were on buy to let properties, the data also shows. At 0.3%, the repossession rate on buy to let mortgages was higher than the 0.17% on owner occupier loans, despite the fact that the underlying arrears rate was lower on buy to let lending than on home owner lending. The CML said that this is unsurprising, as lenders offer extended forbearance to owner occupiers to help them get through periods of financial difficulty without losing their home. Some 1.05% of all mortgages were in arrears equivalent to 2.5% or more of the mortgage balance, down from 1.29% at the end of 2013 and 1.12% at the end of the third quarter of 2014. In numerical terms, this equates to 116,800 loans, down from 124,400 at the end of the third quarter, and 144,600 at the end of 2013. Within the total number of mortgages in arrears, there was also a decline in all of the individual arrears bands. Even among the heaviest arrears band, more than 10%, there was a 14% decline year on year to 24,700 cases at the end of 2014, some 5% lower than at the end of the third quarter. The two main traditional drivers of mortgage difficulty are income shocks such as unemployment and interest rates. The CML report points out that both factors are relatively benign at present, assisting the decline in both arrears and repossessions, supported by effective lender practices. Looking ahead, the CML and lenders are very aware that, at some future point, interest rates will rise, and that this will put increased pressure on some household finances. The CML and lenders urge customers to plan ahead for this, to reduce the risk of shocks whenever interest rates do eventually rise. ‘The relatively low rate of repossession among owner occupiers at around one in 600 mortgages last year, should help to reassure borrowers that, if they do face payment difficulties, lenders will work with them to try to resolve their problems. Repossession is only ever a last resort,’ said CML director general Paul Smee. No one should be lulled into a false sense of security that the current low interest rates we are experiencing will last forever, though. Rules are in place to ensure lenders assess future affordability, but these are not a substitute for careful borrowing,’ he explained. ‘It's essential for borrowers themselves to have one eye on the future. Think through any borrowing taken on now to ensure it will still be affordable if and when rates rise,’ he added. Continue reading →

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