About 36,000 homes were taken into possession by lenders in 2011, with a warning that 2012 will see further problems.
The number of UK homes being repossessed fell to its lowest level in four years in 2011, according to figures published by the Council of Mortgage Lenders (CML), but the organisation warned there will be “a higher number of people facing more serious problems in 2012”.
The total number of homes taken into possession by mortgage lenders in 2011 was 36,200, just below the 2010 figure of 36,300. The CML said low interest rates and the flexibility of lenders had helped keep the number low.
It also said the number of buy-to-let (BTL) properties being repossessed increased by 25% in 2011, with 5,900 being taken by lenders compared to 4,700 in 2010.
The total number of mortgages in arrears fell in 2011. At the end of December there were 159,400 mortgages with arrears equivalent to 2.5% or more of their mortgage balance – down 7.5% from the 2010 figure of 172,400.
The CML said worsening unemployment and continuing pressures on the cost of living “seem likely to result in some further deterioration in the position of households in 2012”. It forecast 45,000 repossessions and 180,000 mortgages in arrears of 2.5% or more by the end of the year.
CML director general, Paul Smee, said: “Low interest rates and good arrears management by lenders are helping the vast majority of those borrowers who face difficulties to keep their homes and get back on track.
“This will continue, but in the face of wider economic difficulties and rising unemployment we are concerned there will be a higher number of people facing more serious problems in 2012.”
Smee urged anyone concerned about their finances to talk to their lender as soon as possible.
“This will give them the best possible chance of staying in their home even if they have a spell of financial difficulty. Forbearance cannot be indefinite, but for most households arrears are temporary and can be resolved,” he said.
The repossession figures were released as housing minister, Grant Shapps, unveiled a £20m “safety net” to help people falling into mortgage arrears.
The Preventing Repossessions Fund will see councils given £19m in cash to offer interest-free loans of up to £5,000 to struggling homeowners. The cash pot could help 3,800 households at a maximum loan size of £5,000 or 7,600 households with loans of £2,500.
Shapps said a further £1m plan to extend the reach of the court desk scheme will ensure free, same-day legal advice is available “at every county court” for homeowners at risk of repossession.
He added: “Repossession should only ever be the last resort. No one in financial difficulty should be embarrassed to seek help if they need it. Today’s cash ensures that no matter where you are in the country the advice and the financial support is on hand to help people get on top of their finances and keep them in their hard-earned homes.”
The CML also reported that the BTL market grew modestly in 2011, with an extra 84,000 mortgages advanced throughout the year. The final quarter saw 34,800 loans worth £4bn advanced, well down on the 2007 quarterly high of £12.7bn.
BTL mortgages now account for about 13% of the total outstanding value of mortgages in the UK, and BTL lending represented nearly 11% of total gross mortgage lending in the fourth quarter of 2011.
Jonathan Samuels, chief executive of property finance firm Dragonfly, said: “BTL is nowhere near the giddy heights of 2007, but these latest figures confirm it is on its way back.
“The BTL sector is one of the few beneficiaries of the current economic climate, driven by the weakness of the economy and the continued caution of high street lenders at higher loans-to-value.”
But Matt Hutchinson, director of flat-sharing website SpareRoom.co.uk, warned: “The reality is that there aren’t anywhere near enough new rental properties coming on to the market to cope with demand.
“Aspiring first-time buyers are renting for longer as they are still finding it almost impossible to get a foothold on the property ladder – and the cruel irony is that people are also being trapped in the rental market by rising rents.”