Reduction in repossessions continues

The number of homeowners experiencing problems paying off their mortgages has fallen, said the Council of Mortgage Lenders (CML) today, but it issued a warning to borrowers to act with caution given the rapidly rising debt burden faced by many British households.

The number of mortgages in arrears fell by 20% in the first half of this year compared to the same period in 2002 and is 12% lower than in the second half of last year, said the CML.

The number of repossessions also continued to fall in the first half of 2003, dropping by almost 40% compared to the first half of last year. In the first six months of 2003 4,270 properties were taken into possession compared to 6,850 in the same period last year.

As a result, the CML has reduced its forecast for the likely number of repossessions for 2003, and now expects around 9,600 for the year as a whole.

Despite the positive figures, the CML warned against taking a laid back approach, given that personal borrowing is standing at what it described as "very high levels".

The Bank of England released figures yesterday showing that consumers took out a record ?10bn more debt last month, defying expectations that they would respond to a squeeze in incomes by tightening their belts. "The continuing reduction in arrears and repossessions is obviously good news. But at the same time it makes sense to plan ahead for a less benign economic environment," said Michael Coogan, director general at the CML.

"Without scaremongering, we want to make sure that borrowers are encouraged to adopt sensible measures to reduce their risk of mortgage arrears in the future."

He added that the CML did not foresee major problems in the near future, but did add that borrowers should consider the impact of any expected interest rate rises next year

"Against this backdrop we would urge all borrowers, and especially those who have bought recently and carry high levels of debt, to ensure that they are building in enough flexibility to their household finances to be able to cope with higher mortgage payments."