Repossession Claims Rise Again (Financial Times)

UK home repossession claims rose again in the third quarter of the year, raising concerns about the impact of higher interest rates and the fall-out from the global credit squeeze.

Figures published by the Ministry of Justice on Friday show that the number of mortgage possession claims issued in the county courts in England and Wales rose by 1 per cent to 34,717 between July and September 2007 compared with the same period in 2006.

However, the number of repossession orders actually made by the courts fell by 1 per cent to 23,806, as many of the claims failed to result in repossession orders.

The credit squeeze has virtually closed the mortgage securitisation market and hit those banks which rely on wholesale funding for mortgages.

As a result, lenders have been forced to rein back on mortgage lending or have increased their rates, which will result in higher monthly payments and added financial strain for borrowers.

Analysts expect that over the next year, mortgage debt will prove more of a strain on consumers than credit card borrowing and personal loans.

The pressure on homeowners is likely to increase as 2m borrowers face a jump in payments in the next 18 months as they come to the end of cheap fixed-rate mortgages and switch to new higher rate deals.

There is also growing evidence that many of the repossession court cases relate to subprime customers with patchier credit histories. But there are now more ways to get a repossessions stopped as lenders are not always that keen to repossess your home.

This type of lending now accounts for about 8 per cent of the UK market and involves lending to riskier customers who are more likely to default.

The Council of Mortgage Lenders, the industry body, said it expected the number of properties taken into repossession will soar next year.