Property repossessions set to soar by 50 per cent in 2008

The number of home repossessions is set to soar next year, the Council of Mortgage Lenders (CML) says.

The CML, which represents UK banks and building societies, says it expects repossessions to shoot up by 50 per cent, from 30,000 this year to 45,000 in 2008. If this proves correct, they will be running at a level not seen since the property crash of the early 1990s.

The number of people struggling to keep up with their mortgage payments is expected to rise as economic growth slows and the five interest rate rises since August 2006 bite. The CML estimates 170,000 homeowners will be in this position next year. Around 145,000 currently find it hard to meet payments.

The options for new mortgage customers may also become more restricted, the CML adds, as lenders find it more expensive to raise money through nervous world financial markets, following the collapse in the US sub-prime lending market. People with poor credit histories and first-time buyers with low deposits are likely to find it harder to obtain a mortgage.

Overall, the CML predicts a rise of 1 per cent in UK house prices next year and a 15 per cent fall in the number of properties sold.

CML director Michael Coogan says: "The housing and mortgage markets are facing their most challenging period since Labour came to power a decade ago. We now expect a slower mortgage market next year, although by no means a stagnant one."