Today, CML figures revealed that repossessions fell 10% year-on-year in Q1 2011, while arrears of 2.5% or more of the outstanding balance dropped to their lowest proportion of all mortgages since Q3 2008.
However, experts have warned that the fall in arrears will be short-lived in the face of inevitable interest rate rises coupled with static salaries and increasing household costs.
Shapps said that people in financial difficulty should not be embarrassed to get help and “bury their heads in the sand hoping the problem will go away”.
He said: “Today’s figures underline how the recession has brought difficult times for lots of people. The most effective thing anyone with money worries can do is to seek early advice and speak to their lender to avoid losing their home.”
The DCLG revealed that 606 people received help from the government’s Mortgage Rescue Scheme in Q1, with local authorities helping and advising 5,039 households with mortgage problems during that period.
Since the scheme’s launch in January 2009, 2,621 homeowners have completed the full process.
Ian Long, managing director of St Trinity Asset Management, said: “The FSA may have concerns over inappropriate forbearance from lenders, but it is record low interest rates that have played the crucial role in putting a ceiling on arrears and repossessions in the past year. With tracker rates and SVRs bumping along the bottom, millions of mortgage holders have been facing exceptionally low monthly payments.
“However, this shouldn’t create a false sense of security for borrowers. As inflation continues to soar, household budgets are already beginning to feel the squeeze of higher living costs and we are beginning to see the impact of public spending cuts ripple through the labour market.”
He said it was vital borrowers sort out their finances before interest rates rise and warned that, should base rate rise earlier or faster than expected, arrears predictions could be hugely underestimated.
Michael Ossei, personal finance expert at uSwitch.com, said: “When mortgage rates start to climb again the reality of stagnant salaries and rising costs will hit home and many households are going to be in dire straits.
“For borrowers coming to the end of a fixed rate, allowing their mortgages to roll onto a standard variable rate is currently very attractive due to the low rate.
“However, with a potential base rate rise looming, standard variable rates are a ticking time bomb. Many borrowers are making the most of it while it lasts, but should be prepared for when rates go up.”
