The number of people facing short-term mortgage arrears has increased, said the Council of Mortgage Lenders, indicating that interest rate rises are causing people to struggle to keep up their payments.

However, the number of repossessions remains flat, according to new figures released this week by the CML.

There were 3,070 properties taken into possession during the second half of 2004 (1 in 3,500 mortgages), compared with 3,160 in the first half and 3,610 in the second half of 2003.

The number of long-term arrears cases (more than 6 months) also remained flat. There were 38,130 cases of 6-month+ arrears in the second half of 2004 (1 in 350 mortgages), compared with 38,460 in the first half, and 41,880 in the second half of 2003.

Short-term arrears of 3-6 months showed their first material increase for the first time since the second half of 1998, rising from 49,720 in the first half of 2004 to 53,960 in the second half (1 in 220 mortgages), and up from 51,910 in the second half of 2003. The numbers are still extremely low by historical standards; when the CML began collecting 3-6 month arrears data in 1994, there were nearly 190,000 cases in the first half of that year, and the current figures are still the third-lowest on record.

Lenders sold 2,540 properties in possession during the second half of 2004 (compared with 3,240 in the first half), and the stock of possessions increased a little to 2,370 up from 1,880 in the first half.

In its Repossession Risk Review, published Wednesday along with the new figures, the CML comments that the increase in arrears is largely a result of the additional pressure on households arising from higher interest rates. The full impact of higher rates is unlikely to have yet fed through to all households, and unemployment may pick up a little. So the CML expects a continued - but modest - increase in arrears, and the number of possessions for 2005 as a whole to reach 8,350 (still below 2002 levels). But the overall economic backdrop is set to remain favourable, so the CML expects arrears and possessions to remain low by historical standards.