Home repossessions rise

Home repossessions have risen by around 30 per cent as borrowers fall behind with their mortgage payments and interest rates rise.

The number of people losing their homes is set to hit the 45,000 mark next year according to the Council of Mortgage Lenders (CML). And researchers at Capital Economics are predicting that house prices could fall by as much as six per cent in some areas of the UK in 2008.

If this comes true, then Britain will see repossessions rise and house prices fall significantly for the first time since the dark days of the early 1990s.

The warning on soaring repossessions comes after five interest rate rises since the summer of 2006, and the problem could worsen because of the global credit crunch as lenders make it increasingly difficult for some people to remortgage.

The predictions have come as figures from the Bank of England – whose Monetary Policy Committee was meeting today to decide on whether rates remained on hold – showed numbers of mortgages approved for people buying a home fell to a two-year low during September.

This was the lowest level since July 2005 and at the same time property information website Hometrack said house prices were falling for the first time in two years, dropping by 0.1 per cent in October in the face of rises in the cost of borrowing and falling consumer confidence.

And thousands of first-time buyers are at risk of facing negative equity after a dramatic rise in the number of 100 per cent mortgages granted.

Jenny Challenor, mortgage strategist at Torquil Clark, the Wolverhampton-based firm of independent mortgage advisers, said: "Borrowers need to batten down the hatches now.

"This means that if your finances are stretched you need to face up to the facts today. If you don't want to risk finding yourself backed financially into a corner, cut back on your spending, clear your debts and prioritise your mortgage repayments."