Less repossessions forecast by the CML as consumers benefit from low rates

Lower interest rates are bringing a bright ray of sunshine into the property market as existing borrowers get significant benefits from the situation, although the housing sector is still not out of the woods yet.

This has been highlighted by the Council of Mortgage Lenders (CML), which has lowered its forecast for repossessions for this year from 75,000 to 65,000 citing the positive effects of the low rates.

Recent government measures to help struggling homeowners and "significant levels of forbearance being shown by lenders" have also informed the decision to revise the figures, the CML stated.

The number of mortgages projected by the organisation to be in arrears by the end of the year has also been revised to around 360,000.

According to the CML, "the raft of measures taken by the authorities has stabilised the economy and will sow the seeds for a recovery over time, including in the housing market".

However, the improvement "is likely to be slow and drawn out, especially as the extensive fiscal, monetary and credit support measures are gradually unwound".

While the figure for repossessions has been revised, forecasts for housing transactions and gross lending have been untouched, meaning the expected 700,000 transactions and £145 billion of gross lending is still on target.

However, the CML added that the picture for net lending looks less negative than previously forecast and it now expects this segment to decline by only around £5 billion compared to the £25 billion that was earlier projected.

The news was welcomed by industry players including Smartlandlord.co.uk managing director Keshav Thukaram, who observed that declining repossessions were good for the stability of the private rented sector.

He explained that despite the fact that the CML did not touch on buy to let, mortgage arrears in the sector will continue to be large, adding that "even if they are largely unchanged from previous figures, their share of the total number of mortgage arrears is likely to rise".

Mr Thukaram went on to warn that some landlords are "behaving irresponsibly" by failing to "use the difference between rental income and mortgage payment in improving their existing portfolio" or seeking investments that may offer better returns.

"Once mortgage payments start rising again, they will be so used to spending this extra income elsewhere that they will find it hard to meet rising mortgage payments," he cautioned.

"This in turn could lead to a short-term increase in buy-to-let mortgage arrears. Landlords need to be cautious and aim to protect themselves - no one should get complacent at the moment."

Meanwhile, housing charity Shelter has urged the government to start preparing for an imminent rise in consumer arrears and repossessions as the effects of rising unemployment hit home, interest rates begin to rise and mortgage support schemes come to an end.

The organisation stated that a second wave of repossessions could hit the country in two years.