Lenders must expect more homeowners to fall into arrears over the coming months, it has been suggested.
Al Elliot, an advisor from the Homeowners Advice Centre, has predicted that many households will struggle to handle their debt management, as falling property prices cause borrowers to fall into negative equity.
Those that do not have to move should aim to stay put in their present properties to avoid the pitfalls of negative equity, he recommended.
However, he noted that the risks may be unavoidable for some, saying: “Inevitably, some people will have to move, sell or downsize and those are the ones that will find it very difficult.”
Consequently, a large number of banks and building societies will see arrears jump as homeowners struggle, Mr Elliot concluded.
Recently, the Council of Mortgage Lenders (CML) stated that it expects around 45,000 homes to be repossessed in 2008.
According to CML figures, 42,000 home loans were approved this August -compared to 103,000 in August 2007.
By Jamie Price