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Arrears fall again but brokers warn against complacency

Mortgage arrears and repossessions hit a new low in the third quarter but brokers have warned against borrower complacency.

They fear borrowers may become too relaxed about mortgage debt and get caught out when interest rates finally start rising.

Some 2,500 properties were taken into possession in the third quarter, a drop of 50% from 5,000 in the third quarter of 2014, according to new figures from the CML.

At the end of September there were 104,600 loans - equivalent to 0.94% of all mortgages - with arrears representing more than 2.5% of the mortgage balance. That is down 14% on the same period last year.

Of these, 99,000 were owner-occupier, down from 100,700 last quarter, and 5,700 buy-to-let, roughly the same.

Paul Smee, director-general of the CML, said: “Looking ahead, there is possibly a risk that people will postpone thinking about the prospect of higher payments as the timing of rate rises continues to stretch beyond previous expectations. But we would urge all borrowers to plan ahead, as prevention is better than cure.”

Jonathan Harris, director of mortgage broker Anderson Harris, said the low number of arrears was to be expected given rock-bottom interest rates, improving employment figures and lender forbearance.

“However, there are still many homeowners being repossessed or finding themselves in arrears on their mortgage each year, which begs the question: what will happen when interest rates start to rise? How will people cope?

“We suspect that when it comes to their finances there are many people teetering on a knife edge and rate rises could easily push them over.

“There is also a risk that recent inflation data which pushes out the timing of the first interest rate rise will encourage complacency among borrowers.”

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