Secondary loans could increase repossessions to 53,000
Shelter is warning that in 2008, repossessions could rise to the levels seen in the early 1990s.
The housing charity is concerned that large numbers of homeowners now have secondary loans on their homes and that Government and industry forecasts for repossessions are too low because they do not take this into account.
The secondary loan syndrome developed during periods of high property inflation, when some homeowners tended to use their properties as banks, taking secondary loans to pay for such items as home improvements or even to pay off credit card debt.
According to Shelter, at least 20% of the repossession orders currently being issued by County Courts involve secondary loans.
The charity is forecasting that repossessions will rise to around 53,000 this year, well above industry estimates and approaching the record levels seen in 1993, when 59,000 homes were repossessed.
According to Shelter’s research, some companies providing secondary loans will proceed to repossession when a borrower defaults on even a relatively small payment.
This tendency, combined with falling house prices, leaves some homeowners extremely vulnerable and less likely to contest applications for repossession orders.
The charity also points out that a continued slide in house prices will compound the situation because it could push large numbers of people into negative equity.