It has been reported that up to four hundred thousand homeowners in the UK could be defaulting on their mortgage repayments by 2011 partly as a result of soaring unemployment levels.

In the recession and housing slump seen in the early 1990s the number of defaulters hit the three hundred and fifty thousand mark, but city experts are now stating that the situation this time around could be even worse, with up to fifty thousand more defaulters than in the 1990s.

Economists have said that with unemployment levels set to exceed those seen in the early 1990s recession it is likely that default levels on mortgages will also exceed 1990s levels, and this means that there could be a sharp increase in repossessions in the UK.

One economist said that the relationship between job losses and mortgage defaults was very strong, and the soaring levels of job losses in the UK would therefore have a serious negative impact on the ability of many homeowners to make their mortgage repayments.

Experts have predicted that by 2011 unemployment numbers could hit the 3.5 million mark, which could result in mortgage defaulter numbers reaching three hundred and seventy five thousand.

They also said that other factors meant that the default levels could rise even further to around four hundred thousand. The predictions were made shortly after one major UK bank, Lloyds Banking Group, stated that around 20 percent of its mortgage borrowers were now in negative equity.

However, officials from the Royal Institute of Chartered Surveyors have said that people should not read too much into these predictions, stating: ‘There has been a clear change in the housing market in the last few months and as a result it is unlikely that we will now see the kind of house price falls widely predicted at the start of the year. However, the outlook for 2010 is fairly uncertain and there is a real risk prices may slip back. Affordability is still stretched and mortgage finance, while improving, is fairly hard to come by.’ 


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