Repossessions hit 16-year high as lenders 'turn to courts first'

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The Independent Online

The number of home repossessions in England and Wales leapt by 17 per cent during the first three months of 2008, providing further evidence of the depth of the crisis in Britain's housing market.

According to new figures from the Ministry of Justice, the number of mortgage possession claims made by lenders hit 16-year highs of 38,688 during the first quarter – more than 3,000 higher than the same period in 2007.

Meanwhile, the number of possession orders signed off by the English and Welsh courts rose above 27,530 during the period, a rise of about 4,000 since the start of last year.

Home repossession orders are now at their highest levels since the housing market crash of the early 1990s, and are expected to continue rising during the rest of 2008, as the credit crunch and a slowing economy put the squeeze on home owners. Although not all court orders result in repossession – with about half being suspended – more than 30,000 families are likely to be evicted from their homes this year.

Citizens Advice, the consumer charity and advice agency, criticised Britain's banks and building societies for turning to the courts too soon, claiming it would be better for both lenders and borrowers if mortgage providers made a greater effort to put affordable repayment schedules in place.

Sue Edwards, the head of consumer policy at Citizens Advice, said: "We have seen a very sharp rise in the number of people coming to us with mortgage arrears, and evidence that in too many cases lenders are using court action as a first rather than a last resort.

"We want to see all lenders doing everything in their power to avoid things getting to this stage. This means treating borrowers in arrears fairly and sympathetically, and being willing to negotiate with borrowers in trouble."

Although the Government announced a new £9m funding package yesterday to help those in trouble with their mortgages – and committed to holding talks with the mortgage industry to discuss what more can be done – Vince Cable, the Liberal Democrat Treasury spokesman, said the measures were not enough.

"The Prime Minister's pride and stubbornness has made him completely unwilling to recognise the dangers in the housing market," he said. "It is overstretched households that will pay the price. This Government must stop having vague discussions with mortgage lenders and instead clearly lay out the procedures which must be followed before a property can be repossessed. Repossession must only ever be a last resort. Lenders must seek all possible alternatives before taking such action."

Grant Shapps, the Conservative housing spokesman, added: "While we welcome the Government belatedly getting on board [with its extra support for home owners], it's too little, too late and does nothing to help the 27,000 families who have already experienced repossession."

The Council of Mortgage Lenders, which represents the majority of Britain's mortgage providers, insisted repossessions were still only being used as a last resort.

Michael Coogan, its director general, said: "No one wants to see repossessions rise. But risk is a part of life and, for some households, circumstances change and they cannot get back on their feet. However, most people who suffer payment difficulties can get out of trouble by taking good advice, prioritising their debts, and communicating with their lender early.

"Lenders are committed to keeping the number of repossessions as low as possible, even in more challenging economic conditions."

Although a growing number of home owners have struggled when renegotiating their mortgages recently, David Hollingworth, of London & Country, the mortgage broker, said most should be able to get the finance they need, albeit at slightly higher interest rates than they might have been paying.