U.K. Mortgage Repossessions Reach Highest Since 1999

U.K. Mortgage Repossessions Reach Highest Since 1999

Feb. 8 (Bloomberg) -- U.K. housing repossessions reached the highest since 1999 last year and will increase further this year as banks curb lending and the economy slows, the Council for Mortgage Lenders said.

Lenders foreclosed on a total of 27,100 properties last year, the most since 1999 and up from 22,400 in 2006, the group, which represents U.K. home-loan providers, said today in London. Repossessions accounted for 0.23 percent of all mortgages.

The housing slump is deepening after the Bank of England raised borrowing costs to a six-year high last year and consumers took on 1.4 trillion pounds ($2.8 trillion) of debt. The Bank of England yesterday lowered the benchmark interest rate for a second time in three months to cushion the economy from slowing growth.

``The number of repossessions is likely to be higher in 2008 as a result of wider issues in the economy and the mortgage funding markets,'' said Michael Coogan, general director of the CML, in a statement.

In the second half of last year, total repossessions were 13,500, close to the 13,600 recorded in the first six months of the year. The number of mortgage payments in arrears rose to 73,400 last year, an 11 percent gain from 2006 and the highest since 2001, today's report showed.

`Disturbing' Arrears

``The arrears are disturbing,'' said Vicky Redwood, an economist at Capital Economics Ltd. in London, who formerly worked as a financial stability official at the Bank of England. ``It's obvious that consumers are coming under pressure and that will slow down the overall economy.''

U.K. economic growth dwindled to 0.5 percent in the three months through January, the lowest pace since 2005, the National Institute of Economic and Social Research said in a separate report today.

The labor market has yet to weaken in line with slowing expansion. Unemployment fell to the lowest since 1975 in December and jobs growth in the quarter through November was the strongest in a decade.

The Financial Services Authority, the regulator for banks, said Jan. 29 that the economy faces a ``vulnerable'' outlook because of a continued lack of credit and a weakening housing market. The report said there was an ``increased risk'' of consumers defaulting on loans, and that repossessions and insolvencies may increase this year.

Housing Market

House prices fell in the quarter through January after tripling in the past decade, HBOS Plc said Feb. 5. Property values slid for a third month in January, the longest stretch of declines since 2000, Nationwide Building Society, Britain's fourth-biggest mortgage lender, said Jan. 31.

British banks told the Bank of England they plan to make fewer loans to consumers and companies in the first quarter after credit costs rose, the central bank said Jan. 3. The squeeze threatens to deepen the economic slowdown.

Alliance & Leicester Plc, the U.K.'s second-best performing bank stock in the past three months, had its debt outlook lowered to ``negative'' by Fitch Ratings on concerns about capital strength and loan growth as consumer bad debts rise.

BLOOMBERG