UK Home Repossessions Rise In Q3: FSA

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The number of home repossessions in the UK rose 2.8% on a quarterly basis in the third quarter to 14,000, mortgage lending data released by the Financial Services Authority showed Tuesday. That was 5% below the peak witnessed at the start of the year.

The total value of outstanding loans stood at GBP 1,203 billion during the third quarter, up 1% from a year ago. New advances totalled GBP 40 billion, an increase of 20% on the second quarter, but less than the GBP 61 billion advanced in the same period last year. New commitments stood at GBP 38 billion, broadly in line with the previous quarter.

Lending for house purchases continued to grab an increasing share of new lending. House purchase loans accounted for 57% of new advances and 62% of new commitments in the third quarter. Remortgages accounted for 34%, the lowest proportion since the series began in 2007. Meanwhile, the proportion of new lending done at loan-to-value of more than 90% continued to fall and accounted for less than 2% of new advances in the quarter.

The proportion of loans to borrowers with an impaired credit history remained unchanged from last quarter, at a series low of 0.4%, the FSA report said. Further, the number of new arrears cases continued to fall, down by 10% in the quarter to 46,000. At the end of the third quarter, the number of accounts in arrears had fallen to 395,000, down 2% in the quarter, but 16% higher than a year earlier.

Commenting of the data, Seema Shah, property economist at Captial Economics said, "Despite the improvement in the economic backdrop, high risk mortgages are still increasingly rare. That doesn't bode well for a sustained house price recovery." Stating that she remains sceptical about the durability of the housing market recovery, Shah said "possessions have further to rise, while mortgage arrears have not yet peaked".

"Economic conditions will need to improve considerably further before lenders and borrowers will be willing to take on more risk. Unfortunately, we suspect that the economic recovery will disappoint and that unemployment will continue rising throughout 2010."

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