Mortgage rates and repossessions on the rise

09 May 2008 / by Rachael Stiles
Mortgage lenders continue to hike their rates despite the base rate staying put, and there are still a soaring number of people seeing their homes repossessed.

The Ministry of Justice has revealed that in the first quarter of the year, there were 38,688 mortgage possession claims issued, a 16 per cent rise on the first quarter of 2007. Of these, 27,530 repossession orders were made – a 17 per cent increase compared to the same time last year.

The Council of Mortgage Lenders has predicted that there will be as many as 45,000 repossessions in 2008, compared to 8,000 four years ago.

Commenting on the rise of repossessions, Nicola O'Reilly from the National Consumer Council said: "Lenders must do more to help home owners before they get into debt by targeting vulnerable customers, such as those coming off fixed rate deals. We would like to see them offer a range of tailored solutions to help borrowers in difficulty, and not rush to use third party debt collection agencies or court action."

In order to help those who face losing their homes, the Government has put together a package which requires county courts to offer free legal protection to any homeowner fighting a repossession order. This is hoped to stave off 85 per cent of repossession orders while other solutions are explored.

The Chancellor Alistair Darling has also promised a £9million injection of funds to Citizens Advice which has reported huge increases in the number of people asking for help and advice about debt and mortgages.

Financial advisors will also be given additional training so that they can deal with the problems faced by homeowners, particularly the 13 per cent that will come to the end of fixed rates deals this year.

While some mortgage lenders are passing on base rate cuts, the problem is being exacerbated by mortgage lenders that are defying the base rate, which was cut last month and remained at five per cent yesterday, by raising mortgage rates.

Alliance and Leicester, the UK's fifth biggest mortgage lender, has increased its rates, adding almost £900 a year to the annual repayments of a typical mortgage, which, together with the rising cost of living, will only add to the number of repossessions.

Ian Cornish, chairman of the Building Society Association has said that the effects of the credit crisis will be deep and long lasting. "There is clearly no going back" he said, from a year that has been a "potent cocktail of liquidity issues, confidence issues, regulatory issues, political issues, credit issues and capital issues."

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