Mortgage arrears at Britain's biggest lender have increased by 33% in six months.
The figures from HBOS, released yesterday within the lender’s half year results to June 30 2005, reveal its total mortgage arrears - including specialist mortgage lending under its subsidiaries such as BM Solutions - increased in value from £2.6bn to £3.5bn, representing an increase of 8,000 cases.
HBOS says this represents only 1.39% of its total mortgage book, which stands at £201bn. And it claims despite the increase in arrears it has still maintained market share of 17%, growing its mortgage book by £7.5bn against the backdrop of a 13% decline in gross mortgage lending across the whole market in the last six months.
Paul Fincham, a spokesman for HBOS says the figures are a source of concern for the lender but adds: ”When you compare it to the overall book as a proportion of the business we have done and as a proportion of the overall market its fairly small. Yes there has been a rise and it was expected but it is a rise in the first half of the year so a lot of the 8,000 new cases in arrears will be early arrears as well.”
The news comes as the Council of Mortgage Lenders (CML) predicts an increase in the number of repossessions and arrears over the next two years.
The CML says 2005 has seen a sharp decline in year-on-year growth rates but claims that while house prices may register modest falls there will not be a “dramatic correction”.
Just ahead of the meeting of the Bank of England’s Monetary Policy Committee today the CML says it believes interest rates have peaked and that a 0.25% cut in rates seems “very likely”. It also adds that while there has been a 23% drop in house price inflation such a drop only serves to return to more normal levels of house price growth.
Duncan Pownall, mortgage development manager at Bradford & Bingley, says the big lenders are very concerned about maintaining market share adding: "We are now in the throes of a fixed rate war. Over the past few weeks we have seen fixed rates drop a number times with the 'big two' Nationwide and Halifax battling it out. Their two-year fixed rates are now priced at 4.39% and 4.29% respectively.
"Lenders are clearly desperate to try and retain customers, especially those coming off cheap fix rates from two years ago, so are devising better deals to keep them.”
HBOS has also put aside an additional £130m to cope with endowment compensation claims saying while it believes such claims may have peaked they have continued to run at high levels in the first half of 2005 and there is continuing uncertainty as to how quickly they will tail off.
Earlier this week Alliance & Leicester (A&L) unveiled a sharp rise in bad debts announcing it would address the problem with further cost-cutting and a drive into the buy-to-let market.
A&L revealed headline profits edged up a mere £1m to £263m while its charges for bad and doubtful loans jumped from £21.6m to £30.1m against a backdrop of higher interest rates.
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