UK repossession figures have not been as bad as expected
Lenders have failed to exhaust all possible ways of keeping people in their homes in a third of repossession cases, a report by charities has said.
Mortgage providers are expected to use repossession only as a last resort under legal rules.
But judges did not always step in to ensure the protocol was followed, said Advice UK, Citizens Advice and Shelter.
The charities did point out that some support packages for struggling homeowners were having an effect.
Low interest rates have also held down the number of homes being repossessed this year.
In November, the Council of Mortgage Lenders (CML) cut its forecast for the number of homes likely to be repossessed this year to 48,000.
Originally, the CML thought that repossessions would rise steeply in the course of 2009 to about 75,000.
The charities said that sub-prime lenders, who specialised in dealing with riskier borrowers, tended to be taking court action earlier than mainstream lenders.
The loss of a job or a drop in income were the most common reasons given for mortgage arrears, and low-income households were the most likely to lose their homes, the charities said.
The government offers some help with paying mortgage interest bills under the Support for Mortgage Interest (SMI) scheme.
This is aimed at helping people who have lost their jobs. It kicks in 13 weeks after a claim and operates for mortgages of up to £200,000.
In the pre-Budget report, Chancellor Alistair Darling announced that the standard interest rate of 6.08% for SMI would be maintained for another six months.
However, the charities claimed that many borrowers who ended up in court were paying higher monthly interest rates than would be covered by SMI payments. They also argued that there was some evidence of shortfall in take-up of this benefit.
"Government, lenders and regulators have taken swift and welcome action to protect people affected by the recession from losing their homes unnecessarily," said David Harker, chief executive of Citizens Advice.
"Our advisers see evidence of these initiatives working in many cases, but our research makes it clear that the safeguards already in place to protect people from avoidable homelessness need to be strengthened if they are to succeed in stemming the rising tide of repossessions."
The report was based on 452 people who were given last-minute help by one of these charities' advisers at courts on the day of their repossession hearing.
Data published on Tuesday by the Financial Services Authority (FSA) showed that the number of repossessions in the third quarter of the year increased compared with the previous three months.
The Financial Services Authority regulates mortgage lenders
New repossessions totalled 14,000, a 2.8% increase on the previous three months, but 5% below the peak at the start of the year.
The number of new cases of mortgage holders getting into arrears on their repayments continued to fall, down by 10% in July to September compared with the previous quarter to 46,000, the FSA said.
The definition of a borrower in arrears covers home loans where the amount of actual arrears is 1.5% or more of the borrower's current loan balance - for example, if the loan balance is £100,000 and the arrears on the loan amount to £1,500 or more.
At the end of the third quarter of 2009 the number of accounts in arrears was 395,000, down 2% in the quarter, but 16% higher than in the same period in 2008.
The government has said it will provide extra funding for debt advice agencies and help desks at 80 courts.
Last-gasp advice over repossessions was offered in 36,000 cases at court desks over the past year, the Department of Communities and Local Government (DCLG) said.
Mortgage lenders also have to tell councils when repossession action has started against residents, so councils have the opportunity to step in to offer advice.
"I welcome the report from Citizens Advice and Shelter. The people who work in these agencies are, in many respects, the unsung heroes of our campaign to help people avoid repossession," said Housing Minister John Healey.
"I am also deeply concerned that a disproportionate number of repossession cases come from specialist lenders. So tougher regulations next year from the Financial Services Authority will mean all borrowers are treated with the same tolerance and understanding, regardless of who their lender is.
"These measures combined will ensure that in all cases, repossession remains the last resort."