Data from both the Financial Services Authority (FSA) and the Council of Mortgage Lenders (CML) has indicated that both arrears and repossessions fell in Q4 2009 and, according to Capital Economics, the number of loans also fell for the second consecutive quarter.

However, there was no improvement in the number of borrowers who were in arrears by 5% or more, but the drop in arrears did indicate a fall in the number of new cases.

Ed Stansfield, chief property economist of Capital Economics, said: ‘Although the broader coverage of the FSA data which, unlike the already-published CML figures include second charge loans, results in a higher level of arrears and possessions, the big picture was similar.’

Access to the most attractively priced mortgages also remains limited as in Q4 2009 only 12% of mortgages were based on an interest rate that was 2% or less above bank rate which is down from 96% at the end of 2007 and 45% at the end of 2008.

The number of new mortgages available with a loan-to-value (LTV) ratio of 90% or more halved in the second half of 2009, as they went from 2.8% in Q2 to 1.4% in Q4. In Q2 2007, there were around 15% available.

Stansfield said: ‘There is some evidence that lending criteria have loosened a touch further in the early part of 2010. But the bottom line is that tighter lending criteria look set to remain a drag on any housing market recovery for some time to come.’