Repossessions rise as crisis bites

By Christina Fincher

LONDON (Reuters) - Lenders took possession of 11,300 homes in the third quarter, up from 10,100 in the second despite government efforts to make home repossessions a last resort, the Council of Mortgage lenders said on Friday.

The number of homeowners struggling to make mortgage payments also rose. At the end of September, 1.44 percent of mortgages were at least three months in arrears compared with 1.33 percent at the end of June -- equivalent to 168,000 households.

The payment profile of buy-to-let mortgages worsened more rapidly in the third quarter than the market as a whole because of falling rents, fraud and some oversupply of rental property.

"Looking ahead, conditions in the wider economy suggest a worsening picture for mortgage arrears, however carefully lenders handle their treatment of borrowers in difficulty," said CML director general Michael Coogan.

House prices have dropped around 15 percent from their peak last year, plunging thousands of homeowners into negative equity. Unemployment, meanwhile, is rising at its fastest pace in 16 years.

The government has secured commitments from lenders that homeowners' mortgage problems will be handled sympathetically. Nevertheless, the CML is sticking with its forecast that 45,000 homes will be repossessed by the end of the year.

"CML data released this morning demonstrates that the worsening economic climate is beginning to have a marked impact on both the levels of arrears and repossessions in the property market," said Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors.

"And with unemployment set to rise sharply as the recession bites, it is inevitable that both indicators will rise further in 2009."