There is a definite conflict in the mortgage market at the moment as home repossessions are significantly lower but growing numbers are in arrears on their mortgage repayments. Some experts warn that this could cause lenders to lose patience resulting in interest rate increases.
As opposed to the first quarter of 2011, home repossessions were down by 1% for the second quarter. In the first quarter there were a reported 9100 homes repossessed but in the second quarter the total was closer to 9000. These figures are based on statistics released by the Council of Mortgage Lenders (CML). However, some mortgage experts fear an arrears timebomb is about to explode which will escalate interest rises in the coming year.
Year-on-year comparison shows that home repossessions for the second quarter in the UK fell by 7% over the second quarter in 2010. Conversely, the number of mortgage arrears is creeping up. The previous figure stood at 77,800 in arrears but that rose to 78,500 for the second quarter. Even so, CML has not chosen to revise their earlier forecast of the number of homes which they expect to be repossessed in 2011 and 2012. Those numbers stand at 40,000 total for 2011 and 45,000 repossessions for 2012.
This is where the disparity begins. It is unclear how projections for greater numbers of repossessions are not increasing in keeping with the projections for significantly greater numbers of mortgages going into arrears. It is felt that CML is being cautious so as to either avoid panic or until they have a clearer picture of what the third and fourth quarter will yield as far as arrears go.
According to Paul Smee, director general of CML, the economy appears to be stabilising as employment is likewise stabilising. At the moment, they see no need to revise any forecasts but are open to revisions as the need arises. CML further advises anyone in arrears to speak with their lenders to work a solution if the problem is temporary.
