Repossessions reflect sub-prime lending

The Council of Mortgage Lenders (CML) has published its half-yearly figures for mortgage arrears and repossessions, showing increases for both.

According to the data, the number of mortgages in arrears of three months or more increased by approximately 4% (to 125,100), in the six months to the end of June 2007. However, the figure is 3% lower than at the end of June 2006.

The Council found that 14,000 properties had been repossessed during the period, representing an 18% increase on the second-half of 2006, and an increase of almost 30% on the first-half of 2006.

The figure for repossessions remains low by historical standards and equates to around 1 in 840 mortgages ending in repossession in the six months to the end of June 2007.

According to the CML, repossessions are increasing because of the growth in of sub-prime lending.

In this sector of the market, arrears more readily end in repossession than in the mainstream mortgage sectors.

As a result, the CML has recently revised its data to reflect the greater risks inherent in sub-prime mortgage lending.

Another influence over repossessions has been the tendency of most lenders to be increasingly active in arrears management.

Many lenders will now seek to establish a repayment plan as soon as one mortgage payment is missed.

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