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Repo decline prompts CML revision

The continued improvement in repossession volumes has prompted the Council of Mortgage Lenders to revise its 2010 forecast.

The CML now expects 175,000 mortgages to end the year 2.5% or more in arrears, compared with its previous estimate of 205,000, and repossessions to total 39,000 for 2010 as a whole, compared with its previous forecast of 53,000.
This follows its announcement that repossession volumes continued to fall in Q2, with the number recorded for the three months to June 30 at 9,400, which is down from the 9,800 seen in Q1 and the 11,800 in Q2 2009.
The number of borrowers in arrears has also declined, with 178,200 loans in arrears equivalent to 2.5% or more of their mortgage balance as at the end of June, which is 5% lower than at the end of March and 17% lower year-on-year.

The CML has defended its revision, arguing that the headline arrears figure masks differences in the experience of different arrears bands. It states: "It is notable that, unlike the lower arrears bands, the higher bands are showing less of a decline, suggesting that there is still a significant segment of borrowers whose arrears may have been stabilised through lender forbearance or other support, but whose situation is not improving enough to enable them to claw their way out of problems.

"These finely-balanced arrears cases are the ones who may be at most risk of tipping into repossession if there are negative changes such as higher interest rates or reduced benefit support."

Separately, the CML has revealed that fixed rate mortgage applications soared in June as borrowers raced to beat a possible base rate hike.

The latest figures from the CML, out this week, reveal that 48% of new borrowers took out a fixed rate deal in June, which marks the highest proportion so far this year.

The CML attributes this to a decline in fixed rate prices as well as the fear of a possible rate hike, though the rate remains at 0.5% for yet another month.

Countrywide's mortgage statistics echo the CML data, with 72% of its mortgage applications in July for fixed rate mortgages and the split between fixed and tracker applications having jumped 19% since January.

Remortgage customers are also opted for fixed rate products in 78% of mortgage applications in June.

Similarly, Alison Beech, Spicerhaart’s business relationship director, says: “Spicerhaart Financial Services has definitely seen an uplift in fixed rate deals compared to last quarter and against the same period last year, with 57% of all deals at fixed rates.

"The average loan size is around £120,000, but we’re not seeing much difference between average loan sizes for fixed rates and tracker rates.”

Meanwhile, mortgage lending increased by 19% on the month and 14% on the year to 52,000 loans worth £7.6bn in June, which marks the twelfth consecutive month in which lending has been higher than the previous year’s level.

There were 27,000 loans for remortgage, worth £3.4bn, up from 26,000 in May 2010 but down from 34,000 in June 2009.

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