THE number of homes re-possessed by mortgage lenders has fallen to its lowest level for almost 20 years thanks to a combination of low interest rates and rising property prices.
The Council of Mortgage Lenders (CML) has revealed that both mortgage arrears and re-possessions fell again in the first six months of 2002.
The 6,850 homes reclaimed by banks and building societies represented a fall of 12 per cent on the figure for the second half of 2001 and 35 per cent on 12 months ago.
Although the CML warned that this number could increase with a rise in unemployment and interest rates, it forecast that any increase was only likely to be modest and not on the scale seen during the property crash of the early 1990s.
CML director general Michael Coogan said: "The current volatility of the stock market makes the economic outlook more uncertain.
Uncertainty
"Borrowers have enjoyed a long period of continuing improvement in arrears and possessions, which has been extended by low mortgage rates. But the trend could be reversed if we have rising unemployment."
Borrowers, he said, often over estimated their ability to pay their mortgage if they lost their job and they should be aware that if they took their mortgage out after 1995 they would get no government help with payments for nine months. In 1991, at the height of the re-possession crisis, the number of mortgage borrowers who lost their homes reached a high of nearly 39,000.
The latest CML statistics show that the number of mortgages more than six months in arrears was also down to 60,000, the lowest figure as a proportion of total mortgages since 1982.
The CML recently called on the Bank of England to increase interest rates to stop the property market overheating.
Paula John, editor of Your Mortgage magazine, said: "Those most at risk of falling into arrears and/or having their properties repossessed in the future are those first-time buyers who are overstretching themselves to get on to the housing ladder.
"A number of lenders are now offering five times single income and Intelligent Finance is offering 4.5 times joint incomes. That's fine while rates are low, but could be problematic if rates rise, or if one partner lost their job." Tweet