Home repossessions forecast cut by 10,000 » Housing » 24dash.com

The Council of Mortgage Lenders today cut its repossession forecast saying lower interest rates and a raft of Government initiatives were helping people stay in their homes.

The group has revised down its forecast for repossessions during 2009 to 65,000 from a near-record 75,000.

But the figure is still the highest since 1992 and nearly two-thirds higher than the 40,000 people who lost their homes in 2008.

The group said rising unemployment would lead to an estimated 360,000 people falling into mortgage arrears of at least 2.5% of their outstanding debt during 2009.

Although its revised forecast is 15% lower than the previous one, the figure still represents a doubling in the 182,600 of homeowners who were in arrears of this level at the end of 2008.

But the CML said record low interest rates were making it easier for households who lost their incomes to keep up with their mortgage, while they also meant people built up arrears more slowly, giving greater scope for lenders to work with borrowers.

At the same time, a range of Government and industry initiatives, such as improvements in support for mortgage interest and the Homeowner Mortgage Support scheme, under which people can defer up to 70% of their interest for up to two years, are helping people stay in their homes.

The group said these schemes had led to more people who got into difficulties contacting their lender, and in most cases they were getting help.

The CML also revised its forecast for net mortgage lending, which strips out redemptions and repayments, during the year.

It now expects this measure to be broadly stable at minus £5 billion, meaning homeowners repay £5 billion more to lenders than they borrow, a considerable improvement on its previous forecast that net lending would be minus £25 billion during the year.

But its prediction for total advances remains unchanged at £145 billion due to the subdued remortgage market, as homeowners either opt to stay on their lender's lower standard variable rate or do not have enough equity in their property to meet the new tougher lending criteria.

The CML said despite some encouraging signs in the housing market, it was too early to be sure that a recent run of positive data signalled the start of a robust recovery.

It added that the lending industry also still faced considerable challenges in increasing the supply of mortgages available.

It said: "Commitments made by some of the large players are unlikely to fully offset the loss of capacity elsewhere. Given also the weak economic backdrop, housing transactions are likely to remain subdued for some time."

As a result, it is continuing to predict only 700,000 homes will change hands this year, down from 905,000 in 2008 and 1.6 million in 2007.

The CML's revised forecast came as the Government announced it was increasing the extra funding available to give free legal advice to people who faced losing their home from £750,000 to £1.5 million.

The service offers on-the-spot help to people who are in court in England facing having their home repossessed or being evicted from rented accommodation.

Liberal Democrat Shadow Housing Minister, Sarah Teather said: “With 65,000 families still facing the misery of repossession and homelessness this year this is no time for complacency. Far too many people are still falling between the gaps of the Government’s existing schemes.

“Ministers have failed to take simple steps to protect these families such as reforming mortgage law so that courts have the power to ensure that repossession is only ever the last resort.”

Shelter chief executive Sam Younger said: "With arrears escalating at an alarming rate, unemployment at its worst for 12 years and interest rates very likely to rise next year, we believe a second, more devastating wave of repossessions could occur within the next two years.

"The Government and lenders are working hard to help homeowners who are struggling now. But they must not be complacent, and we fear they are not planning adequately for the future."

The charity said it had seen a 250% increase in the number of calls to its free helpline regarding mortgage arrears over the last year, with an 85% increase in the number of calls on repossession problems.

Grant Shapps, Conservative Shadow Minister for Housing, said: “What Gordon Brown gives with one hand, he takes away far more with another. Labour Ministers have slashed legal aid for homeowners and is next month imposing massive increases to court fees for debt proceedings. Their announcement today is a drop in the ocean compared to the stealth hike in fees being imposed next month.

“We welcome greater support for struggling homeowners. But small schemes like these can’t hide the fact that this Labour Government has kicked struggling homeowners when they’re down.”