Home repossessions 'are set to soar again': Thousands could lose properties when period of rock-bottom interest rates ends

Over last five years, number of home repossessions has dropped every year

However, this 'benign period' may soon 'be coming to an end', warn experts



House prices are also predicted to rise by 44 per cent over next seven years



T he ‘benign period’ during which the number of families being repossessed or falling behind with their mortgage has remained exceptionally low ‘may be coming to an end’, the Council of Mortgage Lenders said yesterday.

Over the last five years, these numbers have dropped every year as rock-bottom interest rates have helped people to stay in their homes and banks have shown extreme patience towards them.

But the CML said the number of families who lose their homes will pick up when the Bank of England raises the base rate, which has been frozen at 0.5 per cent since March 2009.

Warning: Home repossessions could be set to soar again, the Council of Mortgage Lenders warned yesterday

Bob Pannell, chief economist at the CML, said: ‘The benign period of falling arrears and possessions may be coming to an end.’

He added: ‘We remain aware that a sizeable minority of households continue to be subject to financial pressures.’

Mr Pannell said the ‘vast majority’ of families will cope with ‘a slow but certain transition to more normal interest rates’, but the most vulnerable be crippled by a rise.

Just 30,000 families will lose their home this year, compared to 75,500 at its peak during the last recession in 1991.

Concern: Bob Pannell, chief economist at the CML, said most families will witness 'a slow but certain transition to more normal interest rates'

It comes as a report today predicts prices will rise by up to 44 per cent over the next seven years in a move which will lock out future generations ‘forever’.

The research predicts the average cost of a home in England will rise by £85,500 by 2020 to a record average price of £331,387.

In London, the jump will be even more extreme with prices rising by nearly £200,000 over the next seven years to reach an all-time high of nearly £650,000.

The report, from the National Housing Federation, said the situation is ‘dysfunctional’, adding: ‘England’s housing market is broken.’

David Orr, the federation’s chief executive, said: ‘With house prices set to rocket by 2020, an entire generation will be locked out of home ownership forever and be forced to rent for life.’

It comes as a separate report, from the Royal Institution of Chartered Surveyors, said the country’s housing crisis will get worse unless more new homes are built.

Simon Rubinsohn, chief economist at RICS, said: ‘If there is not a meaningful increase in new homes, the likelihood is that prices, and for that matter rents, will continue to push upwards.

‘It will make the cost of shelter ever more unaffordable.’ The number of news homes being built remains dangerously far below the amount that need to be built to keep up with demand.

Latest figures show 106,500 new homes were built in England last year, but the ‘required’ number is 240,000, according to the National Housing Federation.

By 2020, its analysis predicts the average price of a home will be below £200,000 only in the North West and the North East.

While house prices soar, rents will also rocket, it predicts, as landlords make a killing from young people who have no choice but to rent, even though they would prefer to buy.

Bad news: It comes as a report today predicts prices could rise by up to 44 per cent over the next seven years

In England, the average private rent will jump by nearly 40 per cent from £8,691 a year to just over £12,000.

In September, RICS called for a radical new rule which would prevent house prices from rising by more than five per cent a year.

If action is not taken, it warned at the time ‘another housing bubble, reckless bank lending and a dangerous build up in household debt’ could cripple Britain again.

Its latest report, published today, said the number of estate agents predicting house prices will go up over the next three months has reached its highest level since 1999.

It said 59 per cent more agents predict prices ‘to continue their upward trend rather than fall back’.