With arrears and possessions at their lowest levels for 20 years, the Council of Mortgage Lenders (CML) has unveiled plans for sustainable homeownership to minimise risk of future repossessions.
Peter Williams, deputy director general of the CML, said: ‘One borrower in every 1,000 suffered repossession last year, compared with around one in 130 at the worst point of the cycle in 1991. This is an excellent achievement by the industry, although we would like to see more people secure in their homeownership.’
The new target is to ‘reduce the number of possessions over the economic cycle.’ The CML sees this comprising two parts: trying to keep the average annual number of possessions below 30,000, and keeping possessions lower than they would have been in comparable previous economic circumstances. The average over the last 10 years is nearly 35,000.
The new target replaces the goal which lenders and insurers set for themselves in 1999, when the sustainable homeownership initiative was launched. It aimed for 55% take-up of mortgage payment protection insurance (MPPI) by 2004. However, this was abandoned as borrowers opted for other insurances to offset mortgage payment risks, such as income protection and critical illness products.
The strength of the housing market has also allowed homeowners to offset risk with equity. And unemployment is also lower than expected. As a result, the industry has concluded that holding down possessions long-term is better than setting specific insurance targets.
A recent CML market briefing bolstered this view point. It noted the UK labour market was performing well compared with its European counterparts, with employment at a record high and numbers claiming benefit falling.
Williams said: ‘The time has come to give fresh impetus to our efforts to promote sustainable homeownership. One step the Government could take would be to improve the scheme for payment of income support for mortgage interest for borrowers in most difficulty. The FSA’s mortgage rules should also do more to encourage borrowers to think about how they could manage any changes in their circumstances. ‘