The total number of properties repossessed by lenders last year was 36,200, below the estimate of 40,000 and the lowest annual total since 2007.
However, repossessions this year are predicted to rise to 45,000 and debt experts said it was the calm before the storm, warning that lender forbearance hides the true state of borrowers’ finances.
New figures from the Council of Mortgage Lenders show that repossessions ticked down markedly in the fourth quarter of last year and at 8,500 were nearly 9% down on the 9,300 in the third quarter.
Buy-to-let accounted for 5,900 of all of last year’s repossessions, up from 4,700 in 2010. Overall, 0.31% of owner-occupied properties were repossessed, and 0.42% of buy-to-let properties.
Arrears last year were also down on 2010. By the end of 2011, 159,400 mortgages had arrears equivalent to 2.5% or more of the mortgage balance, 7.5% down from 172,400 at the end of 2010. In the buy-to-let sector, arrears were lower than in the owner-occupier sector – 20.06% in the latter and 1.79% in the former.
Despite its new data, the CML said it has no current plans to revise its 2012 forecasts of 45,000 repossessions and around 180,000 mortgages in arrears of 2.5% or more by the end of the year.
CML director general Paul Smee said: “Low interest rates and good arrears management by lenders are helping the vast majority of those borrowers who face difficulties to keep their homes and get back on track.
“This will continue, but in the face of wider economic difficulties and rising unemployment, we are concerned that there will be a higher number of people facing more serious problems in 2012.
“Forbearance cannot be indefinite; but for most households, arrears are temporary and can be resolved.”
Bev Budsworth, managing director of debt management company The Debt Advisor, said: “Due to record low interest rates and increased flexibility from lenders, people are still paying their mortgage – but only just.
“The CML is predicting 45,000 repossessions for this year so it’s clear that they expect things to get worse, not better. This isn’t great news, especially if you own one of the 101 properties being repossessed every day.
“I believe that worse is yet to come and we may only be seeing the calm before the storm.
“Unemployment and levels of repossessions are inextricably linked. The CML clearly thinks that repossessions will rise in 2012 at the same time as a continued rise in unemployment, currently at 8.4%.
“We are already starting to see lenders ‘weaning people off’ interest-only mortgages. Today, Santander became the first major high street bank to demand a 50% deposit or equity in order to obtain an interest-only mortgage.
“This will be the shape of things to come with lenders eventually trying to switch people away from interest-only mortgages – some 58% of the entire mortgage market.
“I see huge problems for people on interest-only mortgages who have not made adequate additional savings plans and who are being squeezed by their lender to move to a repayment mortgage.
“Add to this, continued volatility in the economy, high prices at the tills and the less than rosy prospects in the job market, and I think we have a ticking time bomb on our hands.”
Mark Blackwell, managing director of xit2, the mortgage and property data exchange specialist, said: “The headline figure may be positive, but it masks serious underlying problems in borrower finances.
“Repossessions are only being kept low by lenders’ generous forbearance policies, which they can’t afford to sustain in the long term.
“These policies are a life support machine for many borrowers.
“There is a block of 30,000 borrowers in serious long-term arrears: it will only take a small downturn in the economy, or a gentle rise in the base rate, to push them into repossession.”