More than 1m people could lose homes in credit crunch, warns City watchdog

BECKY BARROW
UK Daily Mail
Wednesday January 30, 2008

More than 1million families are in danger of losing their home over the next 18 months, Britain's financial regulator warned yesterday.

It fears that huge mortgages and other debts will prove a lethal cocktail during the global credit crunch.

As banks become more wary, many coming out of a fixed-rate term on their home loan will find they cannot switch to another cheap deal.

Even the smallest increase in bills or repayments will tip some over the edge, according to the Financial Services Authority (FSA).

In the bleak forecast, it said that nearly one-fifth of those who took out a mortgage between April 2005 and September 2007 risk having their property repossessed.

This group of 1million includes those who took out their first home loan, and those who remortgaged from one deal to another.

All these customers, who borrowed during a time when property prices were soaring, have two or more of the FSA's three "high-risk" factors.

The factors are: putting down a deposit of 10 per cent or less on a home; taking a mortgage for longer than 25 years; or borrowing more than 3.5 times the customer's annual salary.

The FSA is particularly worried about 150,000 who have all three high-risk factors. They are the most likely to have their homes repossessed, the regulator said yesterday in its annual Financial Risk Outlook.

This would be double the previous record of 75,540 repossessions in the dark days of 1991, according to the Council of Mortgage Lenders.

The other 890,000 homeowners are at risk of "financial difficulty".

Full article here.