Page last updated at 15:25 GMT, Wednesday, 3 December 2008

Repossessions 'to reach 75,000'

Northern Rock branch
The bank expects to account for about 10% of all repossessions this year

The number of homes being repossessed will rise sharply to 75,000 next year, the Council of Mortgage Lenders (CML) has estimated.

That would be almost as many as during the peak of the last recession in 1991.

The CML believes that repossessions, already rising steadily, will hit 45,000 this year.

The lenders organisation has told ministers that on current trends the figure will continue rising unless action is taken to stop repossessions.

"The CML told me that it hasn't yet finalised its forecast for repossessions in 2009, saying it was waiting to see whether ministers would take action to reduce the surge in the number of houses where families are evicted and their properties are sold," said the BBC's business editor Robert Peston.

Rock pledge

Earlier, the nationalised Northern Rock bank, as well as Bradford & Bingley, said they were adopting a policy of waiting six months before repossessing any of their mortgage borrowers who fell into arrears.

We... agree not to repossess a property for a period of at least six months from the point of arrears
Gary Hoffman, Northern Rock chief executive

The banks are copying the recent example of RBS NatWest, now under majority state control.

Northern Rock said it normally took 15 months to repossess a home anyway.

But the bank has been accused of being aggressive and recently admitted that it would account for 10% of all repossessions this year.

"We continue to work with customers facing repayment difficulties to try and agree an acceptable debt management solution and avoid repossession," said Gary Hoffman, the Rock's chief executive.

"In the vast majority of cases, where repossession regrettably does take place, we have been working with the customer for well over six months.

"We will now formalise our policy and agree not to repossess a property for a period of at least six months from the point of arrears," he explained.

Recession

The state controlled bank said repossession was always a last resort, and that at the moment only 1% of its cases involved people who were less than six months behind with their mortgage payments.

Graphic of repossession figures

But the problem is growing throughout the banking industry as the economy heads towards recession and more people are made unemployed.

The number of repossessions jumped by 12% in the third quarter of the year, according to figures from the Council of Mortgage lenders (CML), with 11,300 homes taken back in that period.

That brought the total this year to 30,200, higher than the 26,200 for the whole of 2007, and much higher than the figure of just 8,200 in 2004.

With 168,000 borrowers already behind with their repayments the number of home seizures is likely to grow further.

Court protocol

Last week, the major lenders formally agreed to a minimum three-month delay before starting repossession proceedings, although they argued this was standard practice in the industry anyway.

The announcements from the Northern Rock, and the RBS NatWest on Monday, come against a background of government initiatives aimed at stemming the likely flow of repossessions as more borrowers default on their loans.

In October, lenders were told that if they went to court to gain permission for a repossession they would have to show they had obeyed a new legal protocol.

This requires them to show that they tried to discuss and agree alternative arrangements, which might include a full or partial repayment holiday, changing the type of mortgage or extending the repayment term.

Rescue schemes

In September the government also launched a mortgage rescue scheme aimed at helping up to 6,000 people in England avoid eviction.

A 200m fund has been put into place which will help local councils bail them out.

The options that would be available to a social landlord, such as a council or housing association, include:

• buying the home, paying off the loan, and renting the house back to the family instead

• buying a share in the home and letting the owner pay off part of their mortgage

• simply lending the homeowner the money they need.

Other government measures will allow people on income support, or claiming job seekers allowance (JSA), to apply for much more government money to help repay the interest on their mortgages.

The waiting period for those on income support, or JSA, to be eligble for such support is being cut from 39 weeks to 13.

And the value of the mortgage on which the interest is repaid is rising to 200,000.

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