CML report forecasts that mortgage arrears and repossessions will rise incrementally in 2011.
A small rise in repossessions has been predicted by the CML.
Home repossessions and mortgage arrears will rise slightly in 2011, according to predictions made by the Council of Mortgage Lenders (CML).
Its annual forecast predicts that house prices will either fall slightly or remain at the current level with sales persisting at the level of today’s property market.
The CML also expects that banks will continue with their stringent mortgage eligibility policy preventing newcomers to the property sector from making their first purchase. Currently just 2% of all new mortgages on homes were secured with a deposit worth 10% or less of their purchase price, illustrating the tightening of banking regulations and the difficulty faced by potential buyers armed with low level lump sums.
The Council said: “Given the continuing economic uncertainties, there is little to encourage buyers. First-time buyers will continue to find it difficult to get into the market. With funding in short supply, the availability of mortgages for first-time buyers will remain limited”.
Home repossessions have fallen slightly in the recent months due to the Bank of England’s decision to keep interest rates at the record low of 0.5% – people have found it slightly easier to meet smaller mortgage repayments.
However, the CML has predicted that there will be 40,000 repossessions in 2011 because there are some mortgage borrowers who still cannot meet their repayment plans. This is 4,000 more repossessions than estimated for this year.
The CML said: “We predict a modest increase in arrears and possessions next year, reflecting the continuing pressure on household finances, the persistence of cases of long-term arrears and the government’s decision to cut help for borrowers by cutting payments of support for mortgage interest”.