Mortgage repossession orders rise
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The number of homeowners at risk of losing their homes has risen by nearly a fifth in the past year, figures showed.
Government data showed that a total of 27,530 mortgage repossession orders were made during the first quarter of this year, up 17% from the same period a year ago. It is also a 9% rise compared to the last three months of 2007.
The number of repossession claims was also 16% up at 38,688 compared to a year ago, and 7% higher than the previous quarter.
The data offers an early indication of homeowners' ability to cope with higher mortgage repayments as a result of coming to the end of short-term fixed rate deals following the impact of the credit crunch.
A mortgage repossession order is granted by a court and entitles the claimant - usually a lender - to apply to have the occupier evicted. A claim is issued in a county court and begins an action for a repossession order.
The numbers of both actions are at their highest levels for at least six years.
They have climbed sharply during the past six months as the higher cost of mortgages hit homeowners following a series of interest rate rises last year.
They saw many homeowners having to re-fix their mortgages at significantly higher mortgage rates as the cheap fixed loans that they took out several years ago expired.
Despite a fall in the official cost of borrowing over recent months as the Bank of England grapples with a slowing economy, the credit crunch has led to lenders regularly increasing their mortgage rates.
It has also made them increasingly risk-averse, suggesting some people coming to the end of short-term deals will have trouble remortgaging and will instead have to go on to their lenders' more expensive standard variable rate.
Howard Archer, UK economist at Global Insight, said rising utility and food bills were piling pressure on homeowners.
He said: "The financial pressure on many homeowners is increasing and it seems certain that repossessions will trend up appreciably over the coming months, particularly if the economy suffers an extended marked slowdown and unemployment starts rising, which seems likely."
Mr Archer added: "A significant number of people have had to stretch themselves to the absolute limit to get into the housing market in recent times as prices soared. This means that they are particularly vulnerable to any adverse shock to their finances."
On Thursday the Bank of England resisted making its fourth interest rate cut in six months as policy-makers held rates at 5%.
Shortly afterwards, Alliance & Leicester became the latest lender to hike rates for mortgage customers with smaller deposits.
The group was following in the footsteps of major lenders such as Halifax and Nationwide by introducing different rate tiers for people according to the proportion of their property's value they want to borrow.
It has also repriced its mortgage range, typically raising rates by between 0.2% and 0.9%.
Mortgage lenders are continuing to tighten their lending criteria, with Barclays lending arm the Woolwich also withdrawing its final 95% loan-to-value products this week.
There are now just 201 different mortgage deals on the market that will lend to people with only a 5% deposit, compared with 241 at the beginning of last week and 963 last July before the credit crunch hit.
The number of homes repossessed soared by 21% during 2007 to reach an eight-year high, according to figures from the Council of Mortgage Lenders.
It said 27,100 homes were taken back by lenders last year after their owners failed to keep up with mortgage repayments, more than triple the number three years ago.
It has pencilled in an even bigger rise for this year, estimating that 45,000 people will lose their homes due to being unable to keep up with mortgage repayments. But this forecast was made before the full impact of the credit crunch became clear.