Belfast Telegraph

'Debt timebomb' warning

Number of homes taken over by lenders expected to rise

By Peter Cripps

Home repossessions fell slightly in the second quarter of 2011, figures revealed yesterday, but are expected to rise later this year.

A total of 9,000 properties were taken over by lenders in the UK during the three months to the end of June, compared to 9,100 in the first quarter of the year, according to the Council of Mortgage Lenders.

The fall is due to the relatively stable job market, record low interest rates of 0.5% and a willingness by banks to show leniency to people struggling to meet their mortgage payments, it said.

But the group has stuck to its prediction that a total of 40,000 people will lose their homes this year, up from 36,300 in 2010, due to the squeeze on household incomes as a result of the combination of rising taxes and living costs and slow wage growth.

Home repossessions rose by 15% in the first quarter of the year, the first increase since the autumn of 2009, and are set to continue to rise later this year and in 2012, when repossessions are expected to hit 45,000.

Chris Gardner, director of independent mortgage broker, warned that an "arrears timebomb" will be detonated when interest rates rise and even more people will be unable to keep up with their repayments.

He said: "Lenders' forbearance cannot last for ever - and if they change their approach, the rug will quickly be pulled from under many late payers, leading to thousands more repossessions."

Home owners struggling to meet payments are expected to have a year or two before interest rates rise.

The Bank of England slashed the UK's economic growth forecast for the next two years yesterday, suggesting that the economy will be too weak to withstand a rise.

The Council of Mortgage Lenders' (CML) latest figures reveal a slight rise in the number of homes that have slipped a small way into arrears on their payments, up to 78,500 from 77,800.


The number of predicted house repossessions in the UK this year