The number of homeowners in England and Wales facing repossession after falling behind on their mortgages has risen.

The Ministry of Justice said 28,658 orders were made by the courts in England and Wales in the second quarter of 2008.

That was up 24% on the same period in 2007 and 4% higher than the first quarter of 2008.

The figures come a week after lenders’ data for actual repossessions across the UK also showed a leap in numbers.

Losing a home

Repossession orders come early in the process and so do not always end with somebody losing their home.

Homeowners facing repossession must not bury their heads in the sand, a judge says.
It is when a court grants an order for the possession of a home, but is sometimes abandoned if a repayment deal can be struck between mortgage lender and borrower.

Mortgage possession claims – the earlier first stage of the repossession process – grew by 17% in the second three months of 2008 compared with the same period a year earlier.

See regional breakdown of repossessions

There were 39,078 claims, which showed no change on the first three months of the year.

The credit crunch has led to more expensive mortgages which people have been struggling to pay as other household costs rise.

But the data shows that the numbers have not been accelerating at a significant rate throughout 2008.

Chasing arrears

The Ministry of Justice said that the number of orders increased the most in the Midlands (up 43%) and the least in London (up 12%).

Some lenders are chasing arrears aggressively, the regulator says

Last week, the Council of Mortgage Lenders (CML) said that the number of actual repossessions across the UK rose to 18,900 in the first six months of the year – up 48% on the same period of 2007.

Housing charity Shelter said lenders were “still using repossession as the first rather than last resort”, with the charity reporting a 55% rise in the past six months of people coming to the charity for help.

“Every day Shelter is seeing more and more ordinary hardworking people who are terrified of losing their homes,” said chief executive Adam Sampson.

“They are being punished by rising household bills, escalating fuel charges and food prices that are going through the roof.”

The Financial Services Authority recently suggested that there was evidence of specialist lenders being aggressive in their repossession policies as the squeeze on finances continued.

But the CML said this unfairly tarnished the whole industry. The CML’s Bernard Clarke told the BBC that the number of mortgage possession claims – the first stage of the process – was five-times the number of actual repossessions.

With house prices falling, he said that it could be in both the lender’s and borrower’s interests to deal with the situation quickly before more equity was lost on the property.

Payment options

However, the CML is still predicting that repossessions will eventually rise to 45,000 this year.

“We are making sure the right advice and support is available for the minority of borrowers who may need it at the moment” Caroline Flint, Housing minister

Q&A: Home repossessions

It wants people to contact their mortgage lender as soon as possible if they find themselves in difficulty making repayments.

“There are a range of options your lender can consider to help reduce or reschedule your payments for a period of time while you get back on your feet,” said CML director general Michael Coogan.

David Harker, chief executive of Citizens Advice, agreed that the majority of people could come to a “workable agreement” with their mortgage lender that would prevent them losing their home.

Housing Minister Caroline Flint said: “While we are not seeing repossessions on the same scale as the early 1990s, we are making sure the right advice and support is available for the minority of borrowers who may need it at the moment because of global economic pressures.”

Philip Hammond, shadow chief secretary to the Treasury, said: “Lenders must now act responsibly – even if our prime minister has not done so – to minimise the number of people losing their homes.”

Liberal Democrat Treasury spokesman Vince Cable said: “The level of growth of repossession orders suggests that we are on track for a repossession crisis very similar to the early 1990s.

“It is absolutely vital that the government should intervene and require a proper code of conduct to be implemented by mortgage lenders.”

News reported by The BBC

A former sub-prime mortgage lender is offering an 8% discount to its borrowers if they redeem their loans.

Edeus, which started up in 2006, is making the cash-back offer to 400 customers and may extend it to thousands more if it proves popular.

The lender wants to get the loans off its books but can no longer find professional investors willing to buy.

A spokesman admitted the idea sounded “bizarre” but it was cheaper than selling the loans in any other fashion.

‘Lesser evil’

Alan Cleary, the managing director of Edeus, admitted this would mean making a loss on each mortgage.

“It’s the lesser of two evils,” he said.

“Over the last 10 months the only way we have been able to raise fresh loans is by offering steep discounts to multi-national banks.

“So instead of offering that to the bank we are dealing with customers directly,” he added.

Mr Cleary said the response from his customers had been very good so far, with 20% already expressing a firm interest in paying off their loans early.

“The market for selling on the mortgages is almost dead, and they can be sold only at a very distressed price” Ray Boulger, John Charcol

Edeus is also willing to waive its early redemption and exit fees, but people will have to pay any set-up fees that might be demanded by a new mortgage lender.

The company is no longer offering mortgages to new customers.

Along with other sub-prime and specialist lenders it has been hit hard by the credit crunch.

As a result it has not been able to package up its mortgages and sell them off wholesale to professional investors in order to raise fresh funds.

“The market for selling on the mortgages is almost dead, and they can be sold only at a very distressed price,” said Ray Boulger, from mortgage brokers John Charcol.

Earlier this year several other lenders which had relied on this business model withdrew from the market and closed down.

Edeus says it is staying in business until the market revives by offering mortgage advisory services to other firms in the industry.

Lower rates

Meanwhile the average cost of new, two-year, fixed rate mortgages has dropped back below 7%.

“In the last week a number of lenders including Halifax, Abbey, Cheltenham & Gloucester, Nationwide BS and Woolwich have all started to reduce their rates,” said Michelle Slade, from Moneyfacts.

“[This] has resulted in the average two-year fixed falling back below 7%, today standing at 6.96%,” she added.

The Woolwich, part of Barclays bank, has become the latest to join in by cutting its fixed-rate mortgage deals for the second time in two weeks, by up to 0.32%.

The latest cuts affect its 10, five and three-year deals.

But experts said it was too early to say the mortgage market had “turned the corner”.

“We need to see a more prolonged period of rate reduction, something which is starting to look unlikely,” Ms Slade said.

News reported by The BBC