Mortgage Lenders Face Repossession

With large mortgages and debts on the increase, the news that banks are becoming increasingly wary of lending money will see many people financially stretched to breaking point; especially those who are coming out of a fixed-rate term on their home loan and are now unable to switch to a cheaper deal.

The Financial Services Authority (FSA) have released figures showing that nearly one-fifth of people who took out a mortgage between April 2005 and September 2007, which equates to just over one million people, are at risk of having their home repossessed. This number does include people who took out their first home loan and those who re-mortgaged from one deal to another.

The FSA warn that this group of people qualify for having two or more of the ‘high-risk’ factors they have drawn up for people who borrowed during a time when property prices were on the increase.

The criteria outlined for meeting these ‘high-risk’ factors are people that put down a deposit of 10 per cent or less on a home, those who took out a mortgage for 25 years or longer, or people borrowing more than 3.5 times their annual salary. The FSA have identified around 150,000 borrowers who share all three of these factors and have advised that these are the people most at risk of having their homes reclaimed.

The last time figures for repossessions were at a record high was 1991, but the total then was only 75,540, half of what has been estimated this time round, according to the Council of Mortgage Lenders (CML).