Tuesday, 28 October 2008

Home repossessions and arrears rise as borrowers struggle

by Hilary Osborne
The Guardian, Tuesday October 28 2008 10.53 GMT

The number of properties repossessed by lenders in the second quarter of this year was up 71% on the same period last year, figures showed today.

Rising household bills and increasing mortgage costs resulted in 11,054 new possessions cases in the three months between April nd June this year, compared with just 6,476 in the same quarter of 2007.

The figures, from the Financial Services Authority, also showed an increase in the number of homeowners who had fallen behind on mortgage repayments.

The City watchdog said while the number of new arrears cases had stayed constant, at around 54,000 each quarter since early 2007, consumers were increasingly struggling to clear their arrears. Consequently the total number of accounts in arrears was rising.

At the end of June there were 312,000 loan accounts in arrears, an increase of 3% on the first three months of this year and 16% up on a year earlier.

Over the past year borrowers have been hit by a double whammy of rising mortgage costs and inflation.

Borrowers coming to the end of cheap fixed-rate deals have seen repayments jump, with the credit crunch forcing lenders to reprice deals upwards.

Some have stopped lending to borrowers with big mortgages, leaving those who took out large loans with lenders like Northern Rock unable to move away from high standard variable rate (SVR) mortgages.

The figures still represent a small fraction of the mortgage market, with just over 2% of outstanding mortgages in arrears or possession. However the rising number of people unable to catch up with repayments they have missed suggests repossession rates will continue to rise.

Last year, the Council of Mortgage Lenders predicted the number of homes repossessed this year would rise by 50%, to 45,000, and the FSA's figures for the first half of the year are broadly in line with that, showing just over 20,000 properties were repossessed.

However recent economic news has been more gloomy than anticipated, and rising job losses could push many more homeowners than expected into difficulties.

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