Repossessions outlook not so bleak

The group has revised down its forecast for repossessions during 2009 to 65,000 from a near-record 75,000.

But the figure is still the highest since 1992 and nearly two-thirds higher than the 40,000 people who lost their homes in 2008.

The group said rising unemployment would lead to an estimated 360,000 people falling into mortgage arrears of at least 2.5% of their outstanding debt during 2009.

Although its revised forecast is 15% lower than the previous one, the figure still represents a doubling in the 182,600 of homeowners who were in arrears of this level at the end of 2008.

But the CML said record low interest rates were making it easier for households who lost their incomes to keep up with their mortgage, while they also meant people built up arrears more slowly, giving greater scope for lenders to work with borrowers.

At the same time, a range of Government and industry initiatives, such as improvements in support for mortgage interest and the Homeowner Mortgage Support scheme, under which people can defer up to 70% of their interest for up to two years, are helping people stay in their homes. The group said these schemes had led to more people who got into difficulties contacting their lender, and in most cases they were getting help.

The CML also revised its forecast for net mortgage lending, which strips out redemptions and repayments, during the year.

It now expects this measure to be broadly stable at minus £5 billion, meaning homeowners repay £5 billion more to lenders than they borrow, a considerable improvement on its previous forecast that net lending would be minus £25 billion during the year.

But its prediction for total advances remains unchanged at £145 billion due to the subdued remortgage market, as homeowners either opt to stay on their lender's lower standard variable rate or do not have enough equity in their property to meet the new tougher lending criteria.