Lowest arrears rate for more than a decade as homeowners reap rewards of low interest rates and record employment

Chris Papadopoullos
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Fewer than 1 in 100 mortgage borrowers were in arrears in the final three months of 2015 (Source: Getty)

The number of homeowners behind on their mortgage payments has fallen to its lowest for over 10 years.

Fewer than one in 1,000 mortgages ended in repossession last year, according to figures released this morning by the Council for Mortgage Lenders (CML).

The annual arrears rate for 2015 was 0.92 per cent, meaning fewer than one in 100 mortgage borrowers were behind on payments.

Home-owner mortgage arrears were running at 1.03 per cent in the final three months of 2015. The arrears rate for buy-to-let borrowers was lower at 0.31 per cent.

“Of course it is good news that the levels of mortgage arrears and repossessions remain low and falling. But, at the risk of sounding as if we are crying wolf, we would continue to urge all borrowers to plan ahead for a time when the interest rate environment may be less benevolent. Lenders do not wish to see borrowers who are coping currently falling into difficulty if and when rates do eventually rise,” said CML director Paul Smee.

Jonathan Harris, director of mortgage broker Anderson Harris, was similarly concerned about arrears when interest rates start to rise. He said:

It [the drop in arrears rates] reflects rock-bottom interest rates and improving employment figures, as well as lenders prepared to be flexible and show forbearance.

However, there is no room for complacency. There are still many homeowners being repossessed or finding themselves in arrears on their mortgage each year, which begs the question: what will happen when interest rates start to rise? How will people cope? We suspect that when it comes to their finances there are many people teetering on a knife edge and rate rises could easily push them over.

Mortgage borrowing costs are near all-time lows thanks to record low interest rates at the Bank of England and intense competition between mortgage providers. Meanwhile, the UK's employment rate is currently 74 per cent, according the Office for National Statistics the highest since comparable records began in 1971.

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