The Council of Mortgage Lenders (CML) says that UK house repossessions fell 10% in the second quarter of the year compared to the first.

However, there was still a rise of 14% of homes being repossessed compared with the same three months last year.

The group believes low interest rates, early advice for struggling homeowners and tolerant lenders are helping, but with unemployment still rising, more and more households will get into difficulty.

Low interest rates means those that are falling behind on their mortgage repayments is levelling off.

The number of home loans with arrears of over 2.5% of the mortgage balance in the second quarter of this year was 205,600, compared to 203,900 at the end of last quarter, and 139,700 this time last year.

Negotiations

But separate figures show that there may be a future rise in repossessions yet. The number of court repossession actions started bounced back in the second quarter of the year, rising 10% compared to the first quarter. Repossession orders given by judges also rose at the same time by 16%.

Homeowners can still negotiate with their lenders to stay in their homes at this stage, but nearly half of the repossession orders were suspended as judges allow borrowers to negotiate a deal with mortgage lenders.

The CML say the figures show lenders aren’t being aggressive about lack of payments, but do issue a warning: “with unemployment rising and the economy still weak, the outlook will remain challenging for the rest of this year and into 2010.

“Clearly, low interest rates are also helping borrowers who are committed to working to resolve their arrears, paying what they can – and when they can – towards their mortgage, and maintaining good communication with their lenders.”

Second Wave Still To Come?

The CML recently reduced its estimated number of repossessions in the UK to 65,000. However, homeless charity, Shelter, believe there may be a second wave of repossessions when interest rates rise again.

Kay Boycott from the charity said: “Despite many lenders using more tolerant measures to help their customers, further action is needed if we are to prevent a second and more devastating wave of repossessions.”

CML and the government believe free advice to those falling behind on their repayments and ‘last-gasp’ advice in repossession courts has allowed many to keep their homes. But similar schemes  - such as those to allow people to sell their home to housing associations and live as tenants – have had a slow start.

 Fifteen households completed the ‘mortgage rescue’ process in England by the end of June under a new scheme, and the government will send a fast-track team to oversee it from autumn. Seventy families have been through the scheme in Wales and a hundred and five in Scotland since March. Other people have started the process to eliminate the imminent threat of repossession.

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