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More homes will be repossessed in 2011

By Dominic Welling dominic.welling@consumerchoices.co.uk

Stretched household finances mean that repossessions will rise in 2011 as the housing market stagnates.

40,000 homes will be repossessed in 2010, according to new predictions from mortgage lenders.

Pressure on household finances will force up repossessions from 36,000 in 2010, to 40,000 next year, the Council of Mortgage Lenders (CML) predicted.

Moreover, the number of people in arrears is expected to go up from 175,000 to 180,000.

In a statement the CML said: “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.”

Remortgaging is also expected to remain subdued next year, as there is little incentive for buyers to rush to take advantage of existing fixed-rate deals with interest rates at their historically low levels.

Meanwhile, those borrowers who are currently on attractively priced standard variable rates also have little incentive to change.

The CML added that the first-time buyers will also continue to find it difficult to get into the market next year.

It said: “There is a crumb of consolation for them in that house prices are unlikely to rise significantly.

“While recent house price weakness may persist for some months, we do not foresee any sharp fall in prices, or large numbers of buyers holding off in the hope of getting a better price in the future.”

The CML concluded that the activity in the housing and mortgage markets is set to remain broadly flat in 2011, adding: “we do not envisage a return to the lending levels that characterised the middle of the last decade for many years to come.”