Number of UK repossessions set to soar

The number of repossessed homes in the UK looks set to soar next year to levels not seen since the 1990s house price crash, a trade body predicted today.

At the same time house prices will edge ahead by just 1% in 2008 and property sales will fall by 15%, according to the Council of Mortgage Lenders.

The group expects the number of repossessions to rise by 50% during the year, rising from 30,000 this year to 45,000 next year.

It said this would be the highest level of repossessions seen since the 1990s, although it added the number of mortgages had increased by 1.5 million since then, and the level of repossessions still represented just 0.38% of all home loans.

The number of people who are in arrears of at least three months is also set to increase, with 170,000 people expected to have problems keeping up with their mortgage repayments next year, compared with an estimated 145,000 this year.

The CML said increasing numbers of people were likely to struggle with mortgage repayments next year as the five interest rate rises since the summer of 2006 take their toll.

This would be especially true for the 1.4 million people whose fixed rate deals, taken out when interest rates were much lower, will run out next year.

But it added that additional pressure would be put on households as a result of a tightening in lending criteria sparked by the global credit crunch.

It said remortgaging options available to some borrowers, such as those borrowing high income multiples, people with high loan-to-value ratios and those with adverse credit histories, would have reduced.

The group said the credit crunch would exacerbate trends already emerging in the market.

It predicts house price growth will fall from 7% this year to just 1% next year, while property sales will drop from 1.17 million to just more than one million.