Repossession applications leap 25%
LENDERS applied to the courts for 25,860 repossessions in the first quarter of the year, up more than 25% on the period before. According to data from the Department of Constitutional Affairs, the figure, up from 17,444 a year ago, is at its highest in at least 10 years - the end of the last UK house price crash.
The leap in the number of homebuyers struggling with repayments follows steep increases in the cost of borrowing. The UK base rate has increased from a low of 3.5% in October 2003 to the current 4.75%. The Bank of England's monetary policy committee is expected to hike rates at its meeting next month or, if not, then probably in June.
'We saw four quarter-point rises last year and that would have put a number of householders under particular pressure,' a spokesman for the Council of Mortgage Lenders told This is Money.
The figures were for 'actions entered', the first stage of a repossession where a lender make a request to a county court. Both the Treasury and the CML stressed that the figures did not necessarily herald a rise in actual repossessions. The Treasury said 'actions entered' totalled 67,000 in 1997 against 33,000 repossessions but in 2003 64,000 court orders were issued against only 8,000 actually taken back. An official added that a 2004 figure of 6,230 repossessions was the lowest since 1981.
However, the CML admitted that repossessions are likely to climb sharply this year. 'I don't think anyone would argue that 2004 clearly marked the trough,' the spokesman added. The CML expects around 8,000 homes to be repossessed in 2005, a rise of more than 30%.
Historically low interest rates in recent years have encouraged Britons to rack up record debt of more than £1 trillion. Much of the money has been spent on property, sparking a doubling in house prices in the five years between 1999 and 2004.
The market, however, has cooled as rates have risen. Lender Nationwide will reveal the state of the market in April with its monthly survey tomorrow while Bank of England figures out on Friday will give an idea of mortgage demand.
There was further gloom for the property market when Countrywide, the UK's largest estate agency, warned its profits would be lower than expected.
