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75,000 set to lose their homes

Around 75,000 people will have their homes repossessed during 2009 and the number of people unable to keep up with their mortgage repayments will more than double, the Council of Mortgage Lenders predicted today.

The group expects a 67 per cent surge in the number of people who lose their home during the year, up from an estimated 45,000 for this year.

It also expects around 500,000 people to fall at least three months behind with their mortgage repayments, compared with 210,000 in 2008.

The Council of Mortgage Lenders (CML) warned that despite the work the Government and industry were doing, 2009 was going to be a "very tough year" for the UK mortgage market.

It expects net lending to turn negative for the first year since records began in 1964, meaning that consumers will repay more on their mortgages than they borrow.

Net lending, which strips out repayments and remortgaging, is expected to dive to minus £25bn, as new lending fails to keep up with repayments.

The figure is well down on net lending of £40bn for 2008 and £108bn in 2007, a level that the Government has urged the industry to replicate next year.

Total advances are also expected to be considerably lower at £145bn in 2009, down from around £258bn this year and less than half the £363bn advanced in 2007.

The group said a significant number of the properties that were repossessed were likely to be cases where the home had been abandoned by its owners or the property had been used in a fraud.

A sizeable proportion of the cases are also expected to be buy-to-let properties.

But it added that even though lenders had committed to working with homeowners to help them avoid losing their homes, the worsening economic backdrop pointed to an "inevitable increase" in the number of cases where a sustainable alternative solution could not be found.

The prediction of 75,000 repossessions, which will represent 0.66 per cent of all mortgages, is the same as the one given to ministers earlier this month before the Government announced its new Homeowner Mortgage Support Scheme, under which people can defer paying interest on their mortgage for up to two years.

The CML said schemes such as this one, as well as the greater forbearance being shown by lenders, would contribute to the steep jump in the number of people in mortgage arrears.

It expects the proportion of people who are in arrears of at least three months to soar to 4.41 per cent of all mortgages from an estimated 1.8 per cent this year.

The forecast came as the CML reported that total mortgage advances during November had sunk to just £14.6bn, the lowest level since February 2002.

The figure was 22 per cent lower than in October and 51 per cent below the level for November last year.

The group said that while there was typically a decline in lending levels between October and November, the fall was "considerably larger" than usual, which it said reflected the current market disruption and the continued deterioration of confidence in the economy.

Unsurprisingly, given the problems in the mortgage market, the CML expects activity in the housing market to remain "extremely subdued" next year, with only around 700,000 homes changing hands, down from 900,000 this year and 1.6 million in 2007.

CML director general Michael Coogan said: "In looking ahead to the coming year, the housing market will remain extremely subdued and net mortgage lending is likely to turn negative.

"Repayment problems will worsen against the backdrop of rising unemployment but lenders and Government are working to try to reduce the negative impact on borrowers.

"Recent glimmers of light in terms of Government intervention to improve conditions to support new lending are helpful, but more will be needed."

The group stressed that forecasting in the current climate was extremely challenging, and it has abandoned its usual house price prediction for next year.

It added that the predictions it had made represented a "best estimate of direction of travel", rather than a precise analysis.