Repossessions fall but new cuts put homes in danger

Repossessions of homes from owners behind on mortgage payments fell last year to the lowest level since 1990. But the Council of Mortgage Lenders, publishing the figures yesterday, warned that cuts in the social security safety net taking effect n ext October will leave more householders in danger.

There were 49,210 repossessions in 1994, with 24,190 in the second half of the year. That compares with a 38,930 peak in the same period of 1991 - and 4,520 in the second half of 1983.

The number of borrowers in arrears fell too, with 419,890 more than three months behind on payments. Altogether, one in 25 of Britain's 10.4 million home-owners was in arrears at the end of last year, compared with one in 20 at the end of 1993. The improvement was due to a combination of low interest rates and falling unemployment, the payment of income support direct to lenders and the lenders' own schemes to help home-owners in difficulty.

Adrian Coles, director-general of the Council of Mortgage Lenders, said: ``The Government does not appear to be showing an equal long-term commitment to bringing down mortgage arrears.''

Measures to reduce state support for mortgage interest payments, announced last November by Peter Lilley, Secretary of State for Social Security, provoked a bitter reaction from lenders. Mr Coles said the sharp cutbacks meant arrears would rise and the number of repossessions would increase in 1996.

Additional rises in mortgage rates expected this year and a reduction in tax relief for mortgage interest from April will also tend to increase arrears and repossessions. Rob Thomas, a housing analyst at securities firm UBS in the City, said: ``There will not be a sudden, dramatic increase, but the number of borrowers in trouble is bound to rise.''

The Government expects more borrowers to take out unemployment insurance to protect mortgage payments after the social security changes take effect, but that costs several hundred pounds a year. Insurers say many borrowers will also find it difficult to get cover.

The Halifax Building Society, Britain's biggest mortgage lender, says only 10 per cent of its 1.8 million borrowers already have that insurance.