Leap in repossession orders shows impact of rate rises

The number of court orders to repossess houses has jumped 66% in the space of a year to reach the highest level since 1996, according to figures released yesterday.

The statistics provide fresh evidence that consumers have been squeezed by the series of interest rate rises that preceded the cut in August, and coincides with a rise in the number of people going bankrupt.

According to the Department for Constitutional Affairs, the number of mortgage possession actions "entered" - the first step in the process for seizing a property - totalled 29,991 in between July 1 and September 30 this year. That is 55% higher than the 19,359 actions entered in the same period last year and the highest quarterly figure for 12 years.

There was an even more dramatic increase in the number of orders made for repossession - up 66% from 11,862 in the third quarter of 2004 to 19,687 in the same period this year.

The figures will fuel concern about the health of the housing market and record levels of personal debt, but they do not show how many homes were repossessed. More than half of the orders made were suspended to give borrowers another chance to pay what they owe. In many cases a compromise is negotiated.

A regional breakdown shows some areas particularly hard hit. In St Helens, Merseyside, the number of actions entered rose from 109 to 219, and orders made (excluding suspended ones) climbed from 29 in the third quarter of last year to 66 this time. In Eastbourne, Sussex, actions entered jumped from 37 to 100, and orders made rose from 14 to 42.

The Council of Mortgage Lenders said it was important to note that the figures were much higher than the number of repossessions. In the first half of this year there were more than 54,000 actions entered and 32,000 orders made, but only 4,640 repossessions. "Actual repossession took place in only one in 2,500 mortgages," a spokeswoman said.

Banks and building societies sometimes turn to court action as a way of "creating the disciplined payment structure necessary" to get a household in arrears back on track, the CML said.

It predicts that repossessions and mortgage arrears are likely to increase modestly over the next two years.