Amidst the gloom of house prices falling and difficult times for first time buyers, there is a small piece of good news from the UK property market. The number of homes being repossessed is continuing to fall as the very low interest rates are helping homeowners to keep paying their mortgages.

Figures from the Council of Mortgage Lenders show that 8,900 homes were repossessed in the three months to October. This represents a drop of 5% compared with the previous quarter.

This is the fourth quarter in a row that the numbers of repossessions have fallen since they reached a peak of 12,200. However, the CML pointed out that the trend of falling repossessions could easily reverse if the general economic conditions deteriorate.

Although the number of repossessions fell, there was little change in the number of borrowers who were falling behind on mortgage repayments. The CML’s figures show that 176,100 mortgages had arrears of 2.5% or more of the outstanding balance. This was down slightly from 178,200 three months earlier and down from 203,800 a year earlier.

The CML’s data also shows that the number of homeowners with the lowest level of arrears, where payments are behind by between 1.5% and 2.5% of the outstanding loan, climbed very slightly by 100 to 83,300.

Overall there was a fall of 1,700 in the proportion of mortgage holders with higher levels of arrears of between 2.5% and 5% of the outstanding loan, but the number of people with the biggest arrears difficulties, those arrears of more than 10% of the outstanding loan, increased.

Analysts now believe that most, but not all, householders would be able to cope with any future increases in interest rates.

Many households are adept at adjusting their spending and prioritising their bills to manage their way successfully through periods of temporary difficulty. But the capacity to do this depends on individual circumstances, the extent to which income falls or mortgage costs rise, and how quickly they can get back into full employment.

There have been 28,400 repossessions so far this year, which suggests that by the end of the year the number will be fewer than the CML’s prediction of 39,000 homes to be repossessed this year and certainly down from its previous forecast of 53,000.

However, other figures from the Ministry of Justice show the number of homeowners involved in the earlier stages of a repossession action in county courts in England and Wales has risen slightly.

In the third quarter of the year the number of possession claims launched by lenders was up 4% from the previous quarter to 18,931. Some 14,138 mortgage possession claims led to orders being made by the courts, which was 5% higher than the previous quarter.

Nearly half of all orders still end up being suspended by the courts, typically to give the home owner time to pay.

Homeless charities are now worried that, with so many homeowners in serious difficulty, the pressure could become too much and unless urgent action is taken there could be a sudden surge of people at risk of losing their home in the coming months.

 

Separate figures from the CML showed that there were 50,000 mortgages for house purchase advanced in September - the same as the previous month - displaying a continuing lack of appetite for new home loans in the UK.

Despite the severity of the economic slowdown and the likelihood of only a slow and protracted recovery, a combination of low interest rates and the commitment of borrowers, lenders, the government and debt advisers has helped to keep mortgage payments problems in check so far.

But the UK cannot take falling arrears and possessions for granted, and the recent welcome trend may well yet reverse.

This week has seen the publication of two sets of statistics for the UK housing market, the monthly October figures and the quarterly figures covering the past three months.

Data covering a single month can provide an incomplete picture and is often very volatile, making it difficult to get an idea of underlying trends. These usually become more obvious on longer measurements such as the quarterly figures.

In October house prices in the UK rose by 1.8% compared with the September, when the market saw a surprisingly big drop of 3.6%

The three month comparison shows a broader picture of a gentle decline, with property values dropping 1.2% making the average cost of a house £164,919.

This fall is being attributed to more properties coming onto the market, usually an inevitability after a recession as people have been holding off selling until the market picks up. However, this combined with a decline in demand due to the continuing poor state of the economy had forced prices down again.

Adjusting the monthly figures in line with the overall trend shows that in September the fall was 0.9% and in October 1.2%.

Analysts are predicting that this steady and small decrease in prices will continue for some time, allowing for some more monthly anomalies in the future. Demand will remain subdued for some time yet and houses will keep coming onto the market as their owners can hold back no longer.

The silver lining on this otherwise miserable cloud is that the decline is gentle and not the second collapse of the market that some had feared. When long term growth returns, as it will, then it won’t take long for the market to make up the losses.