Published on : Thu, 27 Oct 2005 06:12GMT
by : Paul Dyson

LONDON - Figures from the Department for Constitutional Affairs show that the housing market may not be as strong as believed since the third quarter has seen a massive jump in home repossession orders.

The figures show that a total of 29,991 mortgage possession actions were taken to the county courts of England and Wales in the three months ending September and 19,687 possession orders were eventually issued. This figure is 66 percent more than what was reported at the same time last year and is the highest since 1993.

Lenders have blamed the record five interest rate hikes that took the rate from 3.5 percent to 4.75 percent between November 2003 and August 2004 for these dismal figures. Even though the rates were pulled back by a quarter point in August this year, a £100,000 mortgage still costs £70 more than what it did a couple of years ago. This is putting a sever strain on the household budget. "The increase in mortgage possessions fits with the slowdown in house price inflation," said Alan Clarke, economist at BNP Paribas. "The conclusion is there are still signs of financial stress among home owners."

Citizens Advice (CA) has revealed that there was a 44 percent increase in the number of people seeking debt related advice over the last six years. Peter Tutton, a social policy officer at CA said that most lenders were patient and took to the court only as a last resort.

"But at the margins of the market we are seeing secondary lenders and right-to-buy lenders failing to negotiate and taking people to court too quickly. We hope this bad practice doesn’t spread and that lenders have learnt the lessons of the 1990s when a lot of unnecessary repossessions were made," he said.

The first thing that consumers who are likely to lag behind in payments must to is talk to their lenders since the latter are often unaware of what is going on, "The next step is to seek advice. Citizen’s Advice offers free, independent and impartial advice. In most cases with the right advice a solution can be found," Tutton concluded.