One million families at risk of losing their home

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by Kay Murchie

According to the Financial Services Authority (FSA), one million families are at risk of losing their home over the next 18 months.

The regulator fears that just a slight increase in bills or repayments, such as credit cards and overdrafts, could cause a problem.

With the ongoing credit squeeze, banks are tightening their lending criteria and those seeing their fixed-rate term on their mortgage expire may find that they cannot switch to another cheap deal.

Figures suggest that almost 20% of those who took out a mortgage between April 2005 and September 2007 are in danger of having their property repossessed. This group of people amounts to 1.04 million and includes those who took out their first home loan, and those who re-mortgaged from one deal to another.

According to the FSA, this group of people have 2 or more of their 3 ‘high-risk’ factors. The factors are putting down a deposit of 10% or less on a home, taking a mortgage for more than 25 years or borrowing more than 3.5 times the customer’s annual salary.

The FSA is especially concerned about 150,000 who have all 3 high-risk factors. They estimate that this group are at the highest risk of having their homes repossessed.

According to the Council of Mortgage Lenders, this figure would be twice the amount of the 75,540 repossessions reported back in 1991. The remaining 890,000 homeowners are at risk of ‘financial difficulty’. This could include repossession or simply missing a monthly repayment or a credit card payment.

Repossessions are already increasing significantly, jumping from just 3,700 between January and June 2004 to 14,000, compared with the same period last year.

An FSA spokesman said anyone with debts, including mortgages, should take stock, review their budget and make sure that it is affordable if there is change in circumstances such as a job loss or an increase in interest rates.