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Repossessions rise 30%

Friday, 3 August 2007 12:00 AM

The number of repossessed homes has risen 30 per cent in a year, figures out today reveal.

A report from the Council of Mortgage Lenders (CML) finds 14,000 homes have been repossessed from January to June, 30 per cent higher than over the same period last year, and 18 per cent higher than from July to December 2006.

The rise in repossessions is down to factors such as an increase in lending to borrowers with poor credit ratings (sub-prime lending), and "increasingly active arrears management" by lenders, as well as interest rates rising.

"Lenders now typically seek contact with the borrower to establish a repayment plan as soon as one payment is missed, so it is likely that many households avoid falling further into arrears unless their financial situation makes this unavoidable," the CML explained.

However, the CML notes this is still historically low.

"Interest rates are clearly higher than many were expecting, and are set to remain so," said Michael Coogan, CML director general.

He added: "Overall, the vast majority of mortgage borrowers will continue to cope, even in a market where affordability is stretched.

"But anyone who thinks they may face difficulties should talk to their lender early to explore their options - lenders see possession as a last resort, but allowing arrears to mount up makes repayment difficulties more difficult to deal with, and is not a sustainable strategy for everyone."

The report also reveals the number of mortgages over three months in arrears reached 125,000 by the end of June, equivalent to around one per cent of the mortgage market.

This is a drop of four per cent compared with the same time last year.

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