Repossessions rise with no light at end of tunnel

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The Independent Online
Home repossessions are rising again for the first time in four years amid widespread forecasts that the situation will worsen and tens of thousands more families will lose their homes.

The Council of Mortgage Lenders (CML) revealed yesterday that 25,200 properties were repossessed in the first half of 1995 - an increase of 4 per cent on the previous six months. Adrian Coles, CML director-general, warned that cuts in income support for mortgage payments from October would make more families homeless.

The rise follows the collapse of the 1991 deal between the Government and lenders under which income support payments were paid direct to building societies and banks in return for softer treatment of customers in mortgage arrears.

Yesterday, the council said the Government's controversial decision to cut income support payments for homeowners who became unemployed added to the pervasive feeling - among lenders and borrowers - that there was no light at the end of the tunnel. The reduction in mortgage interest tax relief in April and slight interest rate rises had already been enough to topple some families.

"Lenders have already stated their concerns about the effect of the government changes to the income support system ... " said Mr Coles. "The continuing weakness of the housing market, the cutbacks in state support for homeowners and a possible increase in unemployment point towards further increases in repossessions."

Peter Lilley, Secretary of State for Social Security, argues that private insurers can take over the burden of the unemployed's mortgage payments. But the CML doubts the private sector can entirely cover the gap.

The CML claims lender-initiated cases account for the increase in repossessions but the National Association of Citizens Advice Bureaux and welfare workers report a rise in voluntary repossessions.

"People who have been clinging on by their fingernails waiting for improvement are beginning to just hand back their keys," said Kila Millidine, housing adviser with Manchester council. "And this is just the lull before the storm. Many more people will lose their homes after October. And if the housing market picks up, lenders will repossess even more homes from those in arrears because they will have prospective buyers."

Moira Haynes, spokeswoman for Nacab, which deals with 10,000 arrears inquiries a month, said lenders were not just cleaning up long-standing arrears but getting tough earlier. Shelter, the charity for the homeless, claims there are now 130,000 homeowners on the brink of repossession. It is calling on the Government to withdraw the October cuts.

Repossessions reached a peak of 38,930 at the height of the property market crisis at the end of 1991. Yesterday's figures showed a disturbing rise in cases of short-term arrears and analysts forecast another increase in repossessions in the second half of this year, taking the total to about 55,000.