Banks and building societies have warned property investors and homeowners in mortgage arrears that more homes face repossession as lenders give up on borrowers in financial trouble.
The threat came from the Council of Mortgage Lenders, the industry voice of all the UK’s major mortgage lenders.
The CML predicts the number of repossessions will rise this year as lenders look at how loans perform to reduce the risk of bad debts.
More borrowers are expected to have problems paying their mortgages due to a combination of job losses, less government support for borrowers in difficulty and an end to the mortgage rescue options for some households with worsening mortgage arrears.
This is expected to add up to about 40,000 buy to let landlords and homeowners facing repossession by the end of the year – an increase of about 10% on the 36,000 or so repossessions in 2010.
Repayments double as fixed rate mortgage deals end
“There are limits to forbearance as well, and this will come to the fore over the next few years,” said the CML – meaning some lenders are losing patience with borrowers who have ongoing problems with arrears.
The latest repossession figures revealed 8,400 people lost their homes in the three months to the end of September 2010 – down from 9,400 for the preceding quarter.
At the end of September, 176,000 mortgages were in arrears of 2.5% or more of the total loan.
New figures for the last quarter of 2010 are expected next month.
Another factor that is expected to impact a property owner’s ability to keep up mortgage payments is the number of fixed rate borrowers who will return to their lender’s standard variable rate.
These borrowers can expect their cheap repayments to double – and most have no choice other than to pay because they cannot refinance to another cheap deal.
Many lenders are pulling fixed rates due to general interest rate uncertainty as the Bank of England considers increasing rates to tackle inflation.
