Repossessions are up but mortgage arrears are down

An estimated 14,000 properties were repossessed in the first six months of the year, a 30% increase on the same time last year.

But while the number of people losing their homes rose, the number of mortgages in arrears came in at 125,000 - 3% down on the same period last year.

Official figures also show the number of mortgage debt court cases falling.

The greater risks inherent in sub-prime lending are resulting in significantly higher levels of repossession in that part of the market compared to mainstream experience

Michael Coogan, CML

Number of people going bust in surprise fall

The Ministry of Justice said that 32,922 mortgage possession claims were issued by the courts - the first stage of the repossession process - during the second quarter of 2007.

This is 0.2% lower than during the same period last year.

Most mortgage possession claims do not end with a property being repossessed, mainly because the borrower presents the court with a case for not proceeding or the lender comes to an arrangement with the borrower.

Calculations changed

Meanwhile, the CML said that it had changed the way it calculated repossession, to take greater account of sub-prime mortgage providers.

This may have boosted the CML's estimate of the number of repossessions.

But according to CML director Michael Coogan, higher UK interest rates and the expanding sub-prime mortgage market are key factors in more people losing their homes.

"Interest rates are clearly higher than many were expecting, and are set to remain so," Mr Coogan said.

"The greater risks inherent in sub-prime lending are resulting in significantly higher levels of repossession in that part of the market compared to mainstream experience."

However, Mr Coogan added that repossessions were still relatively low by historical standards..

"Overall, the vast majority of mortgage borrowers will continue to cope, even in a market where affordability is stretched," he added.

Sub-prime mortgages are targeted at people with poor credit histories.

In the US, a high number of people defaulting on sub-prime loans has led to falling confidence in the housing market.

Insolvency

Meanwhile, the UK government's Insolvency Service has said that the number of people going bust actually fell 8% in the second quarter of the year when compared to the first three months of the year.

Between April and June of 2007, 26,956 people became insolvent.

Experts say the fall may be due to lenders becoming less keen to accept Individual Voluntary Arrangements (IVAs), a type of insolvency.

In total, the number of IVAs fell 15% between the first and second quarters.