Next wave of repossessions could hit UK within two years

The Government and mortgage lenders must prepare for another wave of arrears and repossessions that could hit the UK within the next two years, the housing charity Shelter today warned yesterday.

The charity has said that the Government and lenders must be prepared to deal with hundreds of thousands of homeowners facing repossession or falling into arrears as the effects of rising unemployment hit home, interest rates begin to climb again and mortgage support schemes come to an end.

Yesterday, the Council of Mortgage Lenders yesterday updated its housing market forecast for 2009, reducing its forecast for repossessions for this year from 75,000 to 65,000. But on the same day, figures from the Financial Service Authority (FSA) showed that repossessions are up 62% in the last year, with a 33% rise in arrears.

Shelter chief executive Sam Younger said:

“With arrears escalating at an alarming rate, unemployment at its worst for 12 years and interest rates very likely to rise next year, we believe a second, more devastating wave of repossessions could occur within the next two years. The Government and lenders are working hard to help homeowners who are struggling now. But they must not be complacent, and we fear they are not planning adequately for the future.”

Shelter has reported a 250% increase in the number of calls to its free helpline regarding mortgage arrears over the last year, with an 85% increase in the number of calls on repossession problems.

Mr Younger added:

“At Shelter we speak to thousands of people who are just about managing to pay their current mortgage costs. But a sudden hike in payments or change in circumstance like unemployment can easily be the trigger that fires them towards mortgage arrears and ultimately repossession, often leaving them with no other choice but to rely on the kindness of family and friends and facing an uphill battle to rebuild their lives again.”

“We are pleased the new housing minister has today increased the funding for legal advice at courts. But the Government must also find ways of expanding other advice services for vulnerable households and ensure repossession prevention schemes help more people. Lenders should also give homeowners cast iron assurances that their current, more sympathetic practices towards repossessions will continue during the difficult times to come.”

“It is still a fact that every single day there are hundreds of hard working people losing their homes, and with thousands upon thousands drowning in arrears there is no question we are storing up huge problems for the future. It is vital that people understand the most effective way to prevent repossession is to seek advice early.”

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