LONDON Nov 14 Britain's economic recovery has
helped cut home repossessions to their lowest level in at least
five years, data showed on Thursday, but the rebound could come
back to bite homeowners if it pushes interest rates up sooner
Between June and September 7,200 homes were repossessed -
400 fewer than in the previous quarter and down 12 percent
versus the same period in 2012, data from the Council of
Mortgage Lenders (CML) showed. The repossession rate fell to
0.06 percent, the lowest since the CML began collecting data in
"As the economic recovery gains momentum and unemployment
declines, arrears and possessions will fall further," Capital
Economics economist Matthew Pointon said. "But the real test
will come when interest rates do eventually rise."
Britain's housing market has staged a recovery this year,
helped by government schemes to encourage mortgage lending.
But economists and industry specialists are wary that if
wages remain stagnant, homeowners could struggle when the Bank
of England needs to curb inflation by raising interest rates
from their current record low of 0.5 percent.
"The Bank rate, and interest rates with it, will eventually
be hiked up - and sooner than predicted if the
faster-than-expected fall in unemployment continues," said
Richard Sexton, director of e.surv chartered surveyors.
"A rise in interest rates could potentially push more
homeowners - and particularly first-time buyers - into the red."
On Wednesday, the BoE slashed its forecasts for the
unemployment rate, an indicator it has put at the heart of
decisions over future interest rate moves, but Governor Mark
Carney stressed he was not about to act.
Nevertheless, financial market prices show that traders
still expect the central bank will need to hike rates in early
2015 - sooner than the bank originally forecast.