Repossessions expected to soar in next few months

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by Kay Murchie

Recent Bank of England figures showed an increase in unsecured personal borrowing and as a result, could mean a rise in repossessions.

Research from litigation organisation, Moore Blatch, discovered that 16% of repossession cases were due to borrowing from other sources than a mortgage.

Consequently, Moore Blatch argues the £2.4 billion rise in unsecured lending announced in February by the Bank of England (the largest rise for more than 5 years) may mean homeowners will struggle to maintain their mortgage repayments resulting in a rise in repossessions.

Paul Walshe of Moore Blatch explained that unsecured borrowing has been given a boost by lenders reducing the availability of mortgage equity.

In the past, many people in financial difficulty may have raised finance by withdrawing equity from their property, and are now being forced into taking out personal loans or increasing their overdraft facilities, subjecting themselves to high interest rates, he added.

Borrowers’ monthly outgoings increase considerably meaning they can no longer afford their mortgage repayments, added Mr Walshe.

Following the research, Moore Blatch suggests that the Financial Services Authority take action and ensure people are aware of the risks associated with unsecured borrowing.

A recent survey by Fool.co.uk, the financial comparison website, discovered that 75% of homeowners will see considerable increases in their mortgage repayments when their fixed-rate deals expire this year.

This group of people will be looking to re-mortgage and following the withdrawal of cheap mortgage products in the last week, repossessions look set to soar over coming months.