22-year low in mortgage arrears

The number of mortgage holders that defaulted on their payments was its lowest for 22 years in 2004, new figures revealed today.

14:19 26 January 2005

The number of mortgage holders that defaulted on their payments was its lowest for 22 years in 2004, new figures revealed today.

Despite four interest rate rises, adding 1,000 to the cost of the average mortgage, repossessions were at an incredibly low level historically.

In December the number of repossessions remained flat, the Council of Mortgage Lenders has said.

But the interest rate rises early in the year meant that there was an increase in short-term arrears in the second half of the year.

Council of Mortgage Lenders director general Michael Coogan commented: "The number of properties taken into possession in the second half of 2004 was the lowest since 1982."

But the Council of Mortgage Lenders predicted that the ongoing effects of the Bank of England increasing the cost of borrowing will mean repossessions are set to increase in 2005.

"With short term-arrears now increasing, we are bound to see a rise in longer-term arrears and possessions following behind, although we do not expect a dramatic increase," Mr Coogan said.

"Anyone facing financial difficulties should talk to their lender as soon as possible. Lenders try to treat arrears as sympathetically as they can - and the sooner borrowers seek assistance, the more likely it is that lenders will be able to help," he added.

Short-term mortgage arrears of three to six months increased materially for the first time since the second half of 1998, rising from 49,720 in the first half of 2004 to 53,960 in the second half.

The Department for Constitutional Affairs also published figures for mortgage possession today. Actions in the county courts of England and Wales in the last three months of 2004 rose by 15 per cent year on year.

However, with record employment and historically low interest rates, the vast majority of mortgage holders are making their repayments.

Even with the increase in the second half of last year just one in 220 mortgages fell into short-term arrears, the Council of Mortgage Lenders has said.