Ward, chief executive of Home Funding, says repossessions are likely to double next year as secured loan lenders call in debts and borrowers continue to be pushed onto unsustainable SVRs.
Ward says: “The Council of Mortgage Lenders predicts 45,000 repossessions this year but the economy has only been under real stress since August.
“Rate cuts will help but many consumers are still coming off discount deals and going onto SVRs. And with unemployment rising they will struggle even further.”
Ward says secured lending will also put pressure on borrowers as second charge lenders begin calling in debt.
He says that because such firms are less likely to be paid than mortgage lenders they are likely to repossess more quickly.
This comes as Standard & Poor’s released its Q3 2008 sub-prime residential mortgage securities report.
It reveals that secured loan portfolios are experiencing the highest cumulative losses.
For example, Money Partners’ loan book, mostly made up of secured loans, has seen losses rise from 0.99% at 21 months since origination to 1.26% at 25 months.
Andy South, credit analyst at S&P, says this is because secured loans are riskier.
He says: “In general, the severity of losses suffered on default is higher in books that contain secured loans. This explains why these transactions show higher cumulative losses.”
The report also reveals that repossessions related to mortgages originated in 2007 have risen as high as 3.9%.
South adds: “The 2007 vintage seems the worst at 15 months from origination. The latest rise in repossessions from loans made that year reflects the slow housing market and repossessions that lenders are finding hard to sell on.
“This is likely to happen in all vintages as the housing downturn continues. High arrears have always been a feature of this market, with borrowers’ payment patterns being traditionally more erratic.”
But John Parker, chief executive of the Financial Industry Standards Association, says: “The government has conducted a review of repossessions by secured lenders and found no evidence that they are more likely to repossess than first charge lenders.
“Like mainstream lenders, secured lenders operate in the prime and sub-prime markets. Money Partners classes itself as a sub-prime lender so you would expect its portfolio to reflect that.”
Money Partners refused to comment.