Fewer homes repossessed but mortgage arrears increase

There were 8,500 repossessions between April and June this year, marking the lowest quarterly total since the last three months of 2010, the Council of Mortgage Lenders (CML) said.

The CML said the figures indicate that repossessions are so far on a “lower trajectory” than its previous forecast that they will rise to 45,000 by the end of the year.

But it warned that the stable pattern could still be disrupted amid the Bank of England’s weak forecasts for economic growth.

A CML spokesman said the body is maintaining its previous prediction that repossessions will increase by the end of this year, as the “uncertain backdrop” of the wider economy remains and household finances are still under intense pressure amid high unemployment and minimal wage rises.

About 18,100 repossessions wee made in the first six months of this year, less than half of the total predicted by the CML for all 2012.

But the number of borrowers with high levels of arrears has been creeping up, which is a position they will find it quite difficult to recover from, the spokesman said.

There were 28,300 mortgages with arrears of more than 10 per cent of the balance, an increase from 28,000 during the previous quarter. The number of mortgages in arrears generally remained broadly flat in the second quarter, the figures showed.

By the end of June, the number of loans with arrears of 2.5 per cent or more of the outstanding balance stood at 157,400, 400 fewer than three months earlier.

More than a million home owners have been paying more for mortgages since May, when lenders increased rates, blaming the weak economy and money costing more.