The Council of Mortgage Lenders (CML) has warned that in 2012, mortgage arrears and house repossessions are likely to rise.
This year, there was approximately 37,000 house repossessions and the CML are predicting that this will rise by over 20% to 45,000 next year. However, they indicate that this would still be lower than in 2009 and the much lower than they were in the recession during the 1990’s.
The predictions mirror some made last year; that 2011 would see an in repossessions over the course of the year.
However, a continued low level of interest rates and lenders continuing to make forbearance agreements with struggling borrowers proved the predictions false.
However, the rising level of unemployment is likely to see more people have difficulties meeting their mortgage repayments and increase the level of arrears.
The CML indicate that the number of house sales and the level of mortgage borrowing is likely to fall further next year too. Their forecast suggests that only 825,000 homes will be sold in the UK next year and if this is true, it would be the lowest level since 1978, when modern records began.
The CML also predict that first time buyers are going to face even more difficulties in finding a mortgage over the next year.
Since 2008, mortgage lending criteria has made it much more difficult for first time buyers to get on the property ladder. The CML suggest that banks are starting to find it even more difficult to raise money to fund their own lending and as such the criteria for mortgage lending is likely to become even more strict.
Bob Pannell from the CML did concede that the market was highly unpredictable at the moment.
However he added: “The household sector has been under financial pressure for some time, as a result of falling real incomes, and more recently higher unemployment. This is likely to unwind some of the improvement in mortgage arrears we have seen over the past two years and lead to a somewhat higher level of possessions in 2012.”