Lenders should prepare support for borrowers when rates rise – CML
In its November issue of News and Views, the CML noted persistently low interest rates have contributed to a long period of declining mortgage arrears and possessions.
However, it noted predictions of when the Bank of England will raise its base rate continue to ebb and flow.
The CML said: “If a rise does not come until later in 2015, as many commentators now expect, we would urge against complacency and encourage borrowers to plan ahead for higher borrowing costs.”
While the CML believes households are heeding the message and expects increases in payment difficulties to be relatively muted when the cost of borrowing begins to rise, it urged lenders to consider how to support borrowers in planning ahead for higher costs.
The Bank of England has sought to reassure borrowers by saying that the base rate will rise in a series of ‘baby steps’ and is likely to settle at a lower level than before the financial crisis. The Bank has also said that it will assess carefully the impact of higher costs on household finances, and slow or reverse rate increases if necessary.
CML data shows, for the end of the third quarter of this year, the number of mortgages with arrears equivalent to 2.5% of more of the mortgage balance stood at 125,100, or 1.12% outstanding loans.
The proportion of mortgages in arrears is now at its lowest since the first quarter of 2008.