A rise in unsecured personal borrowing may result in a repossessions increase this year, warns solicitor firm Moore Blatch.
The repossession litigation specialist says the Bank of England figures, which reveal a rise in unsecured personal borrowing, show the pressure home owners will come under this year through mortgage and personal loan repayments.
In a recent survey of UK mortgage lenders, Moore Blatch found that 16% of repossession cases were due to borrowing from other sources.
With unsecured personal borrowing up £2.4bn in February, the biggest rise for more than five years, many home owners may struggle to maintain their mortgage payments and risk losing their homes.
Paul Walshe, head of lender services at Moore Blatch, says: “Unsecured borrowing has been given a boost by lenders reducing the availability of mortgage equity.
“In the past, many people in financial difficulty may have raised finance by withdrawing equity from their property, and are now being forced into taking out personal loans or increasing their overdraft facilities, subjecting themselves to high interest rates.”
He adds: “As a result, their monthly outgoings are increasing substantially, meaning they can no longer afford their mortgage repayments.”
Moore Blatch’s research shows that 73% of mortgage lenders believe the Financial Services Authority should produce guidelines on acceptable borrowing.
A total of 96% say that all borrowing should carry a mandatory risk warning.