Some 150,000 households are in mortgage arrears despite today's all-time low interest rates, and many more could struggle when the Bank of England finally hikes base rates.
The fact that so many homeowners are still in arrears after nearly five years of record low mortgage rates is a major cause of concern, brokers say.
Arrears and possessions have fallen, yesterday's CML figures showed, but that trend could quickly reverse when base rates rise.
Some analysts say the Bank of England could be forced to hike rates as early as next year, with the Bank recently upgrading its growth forecasts and cutting its unemployment projections.
Yesterday, the Bank's markets director Paul Fisher warned that interest rates would soon return to normal once the economic recovery is secured: "Eventually, if we get inflation on target at 2% and economic growth at, say, 2.5%, you might expect interest rates to be in the 4% to 5% range, that would be more normal."
The Bank currently predicts that GDP growth will hit 1.6% this year then rise to 2.8% in 2014. Inflation is currently 2.2%.
Normalised rates what will come as a shock to both existing homeowners are first-time buyers stretching to afford their mortgage, as wage growth remains stubbornly below inflation.
Currently, 149,400 mortgages, representing 1.33% of the entire stock, had arrears equivalent to more than 2.5% of their mortgage balance at the end of the third quarter.
This was down from 154,900 in the second quarter, or 1.38% of all mortgages.
The repossession rate also fell to 0.06%, the lowest level since the CML began publishing quarterly data in 2008.
These falls mask the fact that the housing market is heading for trouble with an interest rate rise a possibility by the end of next year, said Bev Budsworth, managing director of The Debt Advisor.
"We are increasingly seeing individuals whose housing costs are 40% or more of their take home pay which is clearly untenable. When you combine this with high fuel costs and spiralling energy prices, it means struggling families simply do not have enough money to live on.”
Jonathan Harris, director of mortgage broker Anderson Harris, said the fact borrowers are struggling when interest rates are at record lows is cause for concern. "Particularly as Bank of England inflation data released yesterday suggested interest rates may have to rise sooner than the Bank's previous target of 2016.
"Those already struggling to pay their mortgages may now be panicking that the situation will only get worse once rates start to rise. Anyone in this position should speak to their lender about possible solutions.
"While lenders continue to show forbearance to those in difficulty with their mortgage, borrowers must take some responsibility and contact their bank, ideally before they miss a payment."
Borrowers who would struggle if rates were to rise should also consider a fixed-rate mortgage, Harris said. "Although there is a premium to pay for a five-year fix compared with its two-year equivalent, it might be worth buying protection for a longer period."
Richard Sexton, director of e.surv chartered surveyors, said national arrears figures mask significant regional differences, with the North West and Yorkshire facing a particular battle in household finances.
"Even equity rich London isn’t free from its share of arrears and repossessions. There are several areas in our capital where repossessions rates are alarmingly high."
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