The number of British homes repossessed by mortgage lenders has leapt by more than 70 per cent over the past year, as growing numbers of homeowners have been unable to meet payments on their loans.
According to new figures from the Financial Services Authority, some 11,054 homes in Britain were repossessed in the second quarter of the year, up from just under 6,500 during the same period last year, and 9,172 in the first three months of 2008.
The number of repossessions is expected to continue rising, with the FSA figures also revealing an increase in the number of homeowners who are in arrears on their mortgage. By the end of June this year, some 312,000 families were behind on their mortgage payments, up 16 per cent compared to the same period in 2007.
Statistics published by the Land Registry yesterday also revealed a continued fall in house prices, which is likely to exacerbate the problems of those coming up for remortgage and who have little equity in their property.
The Land Registry said average property prices across the country fell by 2.2 per cent in September, and have now fallen by 8 per cent over the past 12 months. It is thought that the actual fall in prices has in fact been even more severe, as transactions tend to take several months to be recorded at the Land Registry. The Nationwide and Halifax house prices, which are based on acceptance prices, are already indicating a 13 per cent fall in prices over the past year.
Howard Archer, the chief UK economist at Global Insight, the financial consultants, said: "The fundamentals continue to be largely stacked against the housing market, and it seems odds-on that prices will fall considerably further.
"With already accelerating unemployment set to pick up significantly, the housing market will suffer a marked rise in the number of forced house sales, and a reduction in the number of potential property buyers. Rising unemployment and recession will also keep wages down, thereby limiting the recovery in affordability stemming from falling house prices and lower interest rates. Indeed, affordability ratios are still relatively stretched despite the marked fall in house prices seen so far." However, Mr Archer said that on the positive side, the Bank of England was likely to make a series of interest rate cuts in the coming months, with the bank rate potentially falling to 2 per cent next year. It is currently 4.5 per cent.
New statistics from the Bank of England yesterday gave some further insight into the number of people who may have overstretched themselves when buying a house over the past few years. By 2007, around a third of all loans were worth more than 3.5 times the borrower's salary, compared to less than 5 per cent in the early 1990s.
Many of those who borrowed heavily also put down very small deposits on their properties. As a result, the Bank's research predicts it would only take a 15 per cent fall in house prices to put more than one in 10 homeowners into negative equity.
The Government has announced new rules which make it harder for lenders to repossess homes.
Meanwhile, the housing charity Shelter says it has seen a 167 per cent rise in calls to its helpline over the past six months, from families seeking advice on repossession. Shelter's chief executive, Adam Sampson, said: "These figures are not only shocking and worse than expected, they highlight the crippling severity of the credit crunch on ordinary homeowners."
Repossessions in the second quarter of this year, up from 6,500 in Q2 last year.