Secondary Loans Increase Likelihood of Repossessions

Mon, 12 May 2008

A UK housing charity is warning that repossessions are at a dangerously high level and could rise to the emergency levels of the early 1990s by the end of 2008. The Shelter charity has drawn attention to the large number of homeowners who are reliant on secondary loans, and believes that Government and industry repossessions forecasts are far too law as a result.

Shelter claims that at least 20 per cent of repossessions orders involve secondary loans, which are particularly popular during periods of high property inflation. During such times, homeowners take secondary loans secured against their house in order to pay for home improvements or to pay off debts .

Such is the anxiety amongst lenders at the moment, Shelter have suggested that some companies providing secondary loans may even a repossession order if even a small payment is missed. Shelter also point out the increasing vulnerability of homeowners, who are less likely to contest the orders given the falling value of house prices, which may leave people in negative equity . Shelter’s forecasts suggest that repossessions will rise to roughly 53,000 in 2008, nearing the 59,000 seen at the peak of repossessions in 1993.
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