Number of home repossession orders up 17% » Bill payments » 24dash.com

The number of homeowners at risk of losing their homes has risen by nearly a fifth in the past year, figures showed today.

Government data showed that a total of 27,530 mortgage repossession orders were made during the first quarter of this year, up 17% from the same period a year ago. It is also a 9% rise compared to the last three months of 2007.

The number of repossession claims was also 16% up at 38,688 compared to a year ago, and 7% higher than the previous quarter.

The data offers an early indication of homeowners' ability to cope with higher mortgage repayments as a result of coming to the end of short-term fixed rate deals following the impact of the credit crunch.

Ministry of Justice figures show that during the first quarter of 2008:

• 38,688 mortgage possession claims were issued on a seasonally adjusted basis, 16% higher than in the first quarter of 2007 and 7% higher than in the fourth quarter of 2007.
• 27,530 mortgage possession orders were made on a seasonally adjusted basis, 17% higher than in the first quarter of 2007 and 9% higher than in the fourth quarter of 2007.
• 47% of mortgage possession orders were suspended, compared to 47% in the first quarter of 2007 and 46% in the fourth quarter of 2007.

During the first quarter of 2008:

• 37,221 landlord possession claims were issued using the standard and accelerated possession procedures on a seasonally adjusted basis, 4% higher than in the first quarter of 2007 and the same as the fourth quarter of 2007.
• 28,503 landlord possession orders were made through the standard and accelerated possession procedures on a seasonally adjusted basis, 10% higher than in the first quarter of 2007 and 2% higher than in the fourth quarter of 2007.
• 41% of landlord possession orders made through the standard and accelerated possession procedures, were suspended, compared to 42% in the first quarter of 2007 and 41% in the fourth quarter of 2007.

A mortgage repossession order is granted by a court and entitles the claimant - usually a lender - to apply to have the occupier evicted. A claim is issued in a county court and begins an action for a repossession order.

The numbers of both actions are at their highest levels for at least six years.

They have climbed sharply during the past six months as the higher cost of mortgages hit homeowners following a series of interest rate rises last year.

They saw many homeowners having to re-fix their mortgages at significantly higher mortgage rates as the cheap fixed loans that they took out several years ago expired.

Despite a fall in the official cost of borrowing over recent months as the Bank of England grapples with a slowing economy, the credit crunch has led to lenders regularly increasing their mortgage rates.

It has also made them increasingly risk-averse, suggesting some people coming to the end of short-term deals will have trouble remortgaging and will instead have to go on to their lenders' more expensive standard variable rate.

Howard Archer, UK economist at Global Insight, said rising utility and food bills were piling pressure on homeowners.

He said: "The financial pressure on many homeowners is increasing and it seems certain that repossessions will trend up appreciably over the coming months, particularly if the economy suffers an extended marked slowdown and unemployment starts rising, which seems likely."

Mr Archer added: "A significant number of people have had to stretch themselves to the absolute limit to get into the housing market in recent times as prices soared. This means that they are particularly vulnerable to any adverse shock to their finances."

Yesterday the Bank of England resisted making its fourth interest rate cut in six months as policy-makers held rates at 5%.

Commenting on today's figures, Shadow Housing Minister Grant Shapps said: "We called on the Government to provide greater debt advice more than 18 months ago and in the last three months David Cameron has urged mortgage lenders to warn borrowers when cheap rates were coming to an end and to consider staggering rate rises.

"While we welcome the Government belatedly getting on board, it’s too little too late and does nothing to help the 27,000 families who have already experienced repossession.

"The Prime Minister could reassure the housing market by ditching HIPs and axing Stamp Duty for first time buyers on properties up to £250,000. It’s time for Gordon Brown to do another u-turn by adopting our housing policies."

Yesterday Alliance & Leicester became the latest lender to hike rates for mortgage customers with smaller deposits.

The group was following in the footsteps of major lenders such as Halifax and Nationwide by introducing different rate tiers for people according to the proportion of their property's value they want to borrow.

It has also repriced its mortgage range, typically raising rates by between 0.2% and 0.9%.

Mortgage lenders are continuing to tighten their lending criteria, with Barclays lending arm the Woolwich also withdrawing its final 95% loan-to-value products this week.

There are now just 201 different mortgage deals on the market that will lend to people with only a 5% deposit, compared with 241 at the beginning of last week and 963 last July before the credit crunch hit.

The number of homes repossessed soared by 21% during 2007 to reach an eight-year high, according to figures from the Council of Mortgage Lenders.

It said 27,100 homes were taken back by lenders last year after their owners failed to keep up with mortgage repayments, more than triple the number three years ago.

It has pencilled in an even bigger rise for this year, estimating that 45,000 people will lose their homes due to being unable to keep up with mortgage repayments. But this forecast was made before the full impact of the credit crunch became clear.

Today housing minister Caroline Flint said families facing repossession because of the credit crunch will get free legal help to avoid losing their homes.

Ms Flint said the move was needed to prepare for mortgage difficulties when fixed-rate deals ended, leaving borrowers facing a payment hike.

A total of 142,905 repossession orders were made during 1991, the height of the UK's last recession, with 75,540 houses actually repossessed.

The Citizens Advice Bureau (CAB) today revealed its own experience of worsening problems for homeowners this year. The organisation said its advisors have experienced a 35% increase in mortgage arrears problems during the first two months of 2008 over the previous year.

CAB's head of consumer policy, Sue Edwards said: "We have seen a very sharp rise in the number of people coming to us with mortgage arrears, and evidence that in too many cases lenders are using court action as a first rather than a last resort.

"We want to see all lenders doing everything in their power to avoid things getting to this stage. This means treating borrowers in arrears fairly and sympathetically, and being willing to negotiate with borrowers in trouble."

David Stubbs, senior economist at the Royal Institution of Chartered Surveyors, said: "Today's repossession numbers emphasise the difficulties that some home owners are having in meeting their mortgage payments. This difficulty may be exacerbated over coming quarters if people who want to re-mortgage find it hard to secure an affordable rate on their new deal.

"The government should consider investigating ways to lessen the impact of repossessions by providing better support and financing for housing associations to take action when families are at risk."