Homeowners with mortgages have been warned by lenders that they should start preparing for a rise in rates. The news follows soon after it was revealed that the number of repossessions fell this past Spring.
However, the concerns that a rise in interest rates might bring up are somewhat mitigated by the quarterly inflation forecast issued by Bank of England governor Mark Carney. This forecast was announced on Wednesday, and contained a statement from Carney saying that future interest rate rises would take place only gradually. The increases would also take into account an assessment of the ability of homeowners to manage.
The Council of Mortgage Lenders (CML) welcomed the news that rate rises would take place “in a series of ‘baby steps'” through which the overall increase would be implemented gradually. They particularly stressed the fact that these steps would reportedly be “matched to a careful assessment of the ability of households to deal with higher borrowing costs” in order to prevent rate rises from putting too much sudden strain on the finances of borrowers.
Nonetheless, the CML still stressed the importance of being prepared for the time when rates do finally rise. According to Paul Smee, the CML’s director general, “rates will rise at some stage, of course, and borrowers should be planning for that now.” Smee added that “any borrower anticipating payment problems should talk to their lender as soon as possible.”
At present, the situation seems to stand in a very positive place. The second quarter of 2014 saw 5,400 properties repossessed because their owners had fallen behind too far with their mortgages. This figure is 1,000 below the number of repossessions that took place in the first quarter of the year. It also represents 2,200 fewer homes being repossessed than in the same period in 2013. Perhaps most encouragingly of all, it is the lowest number of repossessions to take place in a single quarter since 2008 when records began. This fall in the number of repossessions was in line with forecasts that the CML had previously made.
The CML also reported that fewer homeowners are now falling into arrears. At the end of June, 131,400 of mortgage holders were in arrears by at least 2.5% of the total value of the mortage. This is the lowest figure seen since early 2008.
Unfortunately, those who rent their properties do not seem to be in such a strong position. Landlord Possession Claims, the first stage in the tenant eviction process, have been steadily increasing since 2010 according to the Ministry of Justice.