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More people who have adverse mortgages and adverse debts are finding ways to avoid having their homes repossessed, giving them the chance to work towards getting back into the black.

According to the Council of Mortgage Lenders, lenders took 10,200 properties into possession in the last three months of 2009 – 13% lower than the previous three months, and 2% down on the last three months of 2008.

Although adverse borrowers are more likely to stay in their homes thanks to lenders showing more forbearance, 188,300 mortgage borrowers still ended the year with arrears equivalent to at least 2.5% of their whole mortgage – that roughly correlates to three months of non-payment, which is a serious problem.

Michael Coogan, director general of the CML says: "The fact that mortgage arrears and possessions did not rise as much as we feared in 2009 is testament to the effect of low interest rates, and a great deal of concerted effort by lenders, government and the advice sector to help borrowers to address financial difficulties when they occur.

"We are not out of the woods yet – 2010 will still be a challenging year for many borrowers, and some households will inevitably find their finances being squeezed if and when interest rates do eventually rise. But borrowers should feel reassured that the vast majority of people who get into arrears manage to keep their homes."

But Brian Murphy, head of lending at the Mortgage Advice Bureau warns that if rates were to rise materially then there could be an increase in arrears and repossessions in the future. He says: "It's essential that anyone who is beginning to struggle with their repayments gets in contact with their lender straight away in order to find a solution. The worst thing to do is stick your head in the sand."

SOURCE: CML, MAB, 11/02/10

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