Less than 1 in 1,000 mortgages ended in repossession in 2015, according to the latest research from the Council of Mortgage Lenders (CML).
Mortgage arrears dropped to the lowest level in over a decade, kept down by the recovering economy and interest rates at a record low. The Council of Mortgage Lenders revealed just 0.92% of all UK mortgages were in arrears during 2015 – the best level since 2004.
Repossessions also dropped, with just 10,200 home-owners forced to hand back their keys in 2015 – a drop of over 50% on 2014.
Figures from the Ministry of Justice also show that between October and December 2015 mortgage possession claims recorded in county courts were down 45% (4,349 recorded) compared to the number in the same quarter in 2014 – and the lowest figure since 1987.
Paul Smee, director general of the CML, urged home owners to plan for the impact of future rate rises. He said: "Of course it is good news that the levels of mortgage arrears and repossessions remain low and falling.
"But, at the risk of sounding as if we are crying wolf, we would continue to urge all borrowers to plan ahead for a time when the interest rate environment may be less benevolent.
"Lenders do not wish to see borrowers who are coping currently falling into difficulty if and when rates do eventually rise."
The Bank of England has held its base rate at 0.5% since 2009 to stimulate lending in a struggling economy, keeping mortgage rates cheap.
A rise in the base rate was anticipated in 2015 but worries over levels of debt in emerging markets and the economic slowdown in China caused policymakers concerns about moving too soon.
Simon Butler, Associate Director at Contractor Mortgages Made Easy said: “Over the last year many mortgage lenders have offered some of their lowest ever rates thanks to the Bank of England base rate and intense competition between mortgage providers.
"Still there are concerns amongst policymakers trying to curb risky lending while rates are low. For example only 15% of a lender's outstanding mortgages can be worth more than 4.5 times the borrower's yearly income.
"The Financial Conduct Authority have already ramped up affordability tests that lenders must perform on potential borrowers to make sure they could cope with repayments when rates rise.”
Article By: Bradley George, Senior Mortgage Consultant at Contractor Mortgages Made Easy
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