Half a million people in the UK to fall behind on their mortgages during 2009

20 December 2008

According to the Council of Mortgage Lenders (CML), the economic downturn will cause a huge rise in mortgage arrears in 2009, with the number of households over three months behind on their repayments breaching the 500,000 mark.

The CML said 2009 would be a rough year on account of the recession driving up unemployment that would cause around 75,000 home repossessions.

The government intends to go ahead with a "mortgage holiday" plan with to keep more families in their homes. However, mortgage experts believe that the plan could backfire and be an incentive for people to incur even more debt by deferring payments.

Reports suggested that repayments have outstripped new borrowing for the first time since 1964, when record keeping began. Lack of demand is expected to drive prices down further, with the average expected fall of around 15 per cent in 2009.

The drying up of lending and the consequent mortgage drought is also expected to cause a further drop in the number of homes changing hands.

Only 700,000 transactions took place during the year, down from 1.63 million in 2007. Net lending, which is the amount of new borrowing less repayments and people re-mortgaging, is likely to dip into the red by £25 billion next year, below net lending of about £40 billion this year and £108 billion in 2007.