On arrears, there continued to be a modest improvement across all arrears bands (see note 2) in the fourth quarter, and in 2011 as a whole compared with the previous year. At the end of 2011, 159,400 mortgages had arrears equivalent to 2.5% or more of the mortgage balance, 7.5% down from 172,400 at the end of 2010.
Buy-to-let properties accounted for 5,900 of the repossessions in 2011, up from 4,700 in 2010. The overall repossession rate was 0.32% in 2011 – 0.31% on owner-occupied properties, and 0.42% on buy-to-let. This compares with an overall rate of 0.33% in 2010 – 0.32% on owner-occupied properties, and 0.36% on buy-to-let.
The higher repossession rate on buy-to-let is not reflected in the arrears experience, however, with the buy-to-let sector experiencing a lower level of arrears than the owner-occupier sector. While the 3 months arrears rate stood at 1.98% of all mortgages at the end of 2011, the proportion was higher among owner-occupiers (2.06%) than among buy-to-let mortgage holders (1.38% if receiver of rent cases were excluded; 1.79% if included).
Although arrears and repossessions throughout 2011 were fairly stable, the CML has no current plans to revise its current 2012 forecasts for the year. 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. The CML anticipates that this is likely to result in around 45,000 repossessions and around 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 that there will be a higher number of people facing more serious problems in 2012.
"Anyone worried about their finances should talk to their mortgage lender and take advice on their other debts 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."
Stuart Law, Chief Executive of buy-to-let specialists Assetz, said:
“Investors are returning to UK property in droves, encouraged by a greater number of affordable buy-to-let mortgage products and continued low returns on savings in the bank. Assetz is seeing 2,000 new investors on average every month, all eager to dip a toe into this burgeoning market.
“Although some landlords have seen minimal capital growth on their investments in the last few years, they look set to continue to benefit from excellent rental returns. Rents are currently between 10% and 20% higher than in 2006 with yields of 8% readily available. A shortage of property in the capital and other major cities such as Manchester, Liverpool and Leeds will continue to drive up rents, with supply unlikely to ever meet demand. This will continue to underpin the buy-to-let market in the coming years.”
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