The Financial Services Authority has some discouraging news regarding the UK housing market. The number of homeowners delinquent on mortgage payments totals an estimated 350,000, and the number seems to be growing with some type of arrears added to the balance. With the strength of the economic recovery being measured mainly by the housing market, figures regarding late payments need to be headed in the opposite direction.
This is the absolute last factor the UK banking sector needs to be working against them. The report by the FSA found that many borrowers are paying some, but not all, of their monthly payment. Some borrowers are not making any payment at all.
Lenders are seeing that repossession benefits no one and have instituted an arrear’s add-on which seems to be helping many. More than 16,000 borrowers have had mortgage arrears added to their outstanding balance. The total, although minimal to what the industry has seen as a whole, is a whopping 44 million pounds.
Not only lenders realize that repossessions are helpful for no one. The government sees the logic as well. They have launched several different schemes to help those homeowners who need it the most. This has resulted in far fewer repossessions than what was once expected.
Even though repossession figures are sitting on the low side of what was expected, the CML is concerned more homeowners will soon be in search of a new dwelling. This will unfortunately not be a voluntary search.
The CML remarked: “We predict a modest increase in arrears and possessions next year, reflecting the continuing pressure on household finances, the persistence of cases of long-term arrears and the government’s decision to cut help for borrowers by cutting payments of support for mortgage interest,”
The FSA report also showed some signs of life from the struggling housing market. Net lending is over 8 billion pounds, which is the highest in two years. Also, an unexpected slight surge occurred in Q3 of this year.
Nonetheless, the CML has a less than bountiful vision for the year 2011 and beyond, saying: “Activity in housing and mortgage markets is set to remain broadly flat in 2011 and we do not envision a return to the lending levels that characterised the middle of the last decade for many years to come.”
Ian Perry, of the Royal Institution of Chartered Surveyors, commented on the spending cuts which will be taking place in the next few months, saying: “Despite some better economic data, fears over how future spending cuts will impact on the jobs market is clearly still weighing heavily on potential purchasers’ minds, with many deciding to ‘wait and see’ until the new year. Meanwhile, the lack of mortgage finance continues to deter first time buyers.”
First-time buyers continue to lead the pack in having difficulty pulling together enough financing for a suitable down payment. Loans with a deposit of 10% or less of the purchase price account for just 2% of all new mortgages.
