With the downturn in the economy that has thrown markets all over the world into a slump in recent months, the number of homes being repossessed by lenders is increasing at a rapid pace.

According to the City Watchdog, repossessions this year are up about 92% over last year. The statistics from the Financial Services Authority show that for the three month period ending on September 30, 2008 there were almost 14,000 homes reposed.

Due to falling house prices and people who have borrowed on the strength of equity in their homes, many homeowners are now finding themselves in a state of negative equity, which means they have an outstanding balance on their mortgage that is greater than the value of their home. During the current credit crunch, many people are losing their jobs with companies going out of business or downsizing.

Even those that are not in danger of losing their jobs are finding it a lot harder to manage their finances because of the rising costs of food, electricity and petrol. As a result the number of people who are behind in their mortgage repayments has jumped to 340,000, which represents an increase of 24% over the full year and 20% during the three month period.

According to officials of the FSA, they have seen increases in the last year and a half in the number of people who are in arrears equal to 1.5% of their mortgage debt to the tune of 4% per quarter. However, the 10% jump at the end of September was very significant because of the dramatic increase in such a short period of time.

During the third quarter of the year, even more people fell behind in their payments – a further 30,000 homeowners. Those who were in arrears were able to make a portion of their monthly mortgage payment, but this was less than half of what was required to keep the account up to date. Although repossession of home does occur every year, the lenders are usually able to sell off most of these homes to redeem the money that was borrowed.

Only a small percentage of those repossessed in the last year have been able to be sold with the number up from the average 7000 homes to 7,687. As a result there are approximately 27, 123 repossessed homes still unsold at the end of the last quarter – a number that represents an increase of 27% over the previous quarter and an increase of 111% over the same period of 2007.

These statistics are in keeping with those published by the Council of Mortgage Lenders. According the statistics of this organization, lenders that are members of the council were involved in the repossession of 11.300 homes during the third quarter of 2008. This number is an increase of 12% over the same time in 2007. The council also reported that the number of borrowers who found themselves in arrears on their mortgage during this period rose to 168,000, an increase of about 8%. This number is substantially lower than the figure reported by the FSA but there are differences in the way the two agencies measure the levels of arrears.

There is very little good news from the FSA with regard to the mortgage industry. Fewer loans for new homes are being approved. In the second quarter of 2008, the total amount of new mortgages approved by lenders amounted to almost £2 trillion. The third quarter of the year saw only a 0.5% increase over this amount. Net lending also dropped by 36% in this same period and advances were also lower by about 15%.

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