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Possessions have risen by 71% since Q2 2007, data from the Financial Services Authority reveals.

The regulator has published its latest mortgage lending data covering the period from Q1 2007 to the end of Q2 2008. It says the number of new possessions has risen significantly since Q3 last year, with the 11,054 new cases in Q2 - after 9,172 in Q1 2008 - being 71% higher than a year earlier. The total value of outstanding loans is £1,178bn, an increase of 7.5% compared to a year earlier. But quarterly growth continues to slow, with a Q2 increase of just 1%.

The FSA reports new lending peaked in Q3 2007 at £102bn and has declined to £72bn in Q2 2008, leaving gross lending 26% lower than a year earlier.

Loans to borrowers with an impaired credit history represented 2.1% of new lending in Q2 2008 compared to 3.4% a year earlier.

While the FSA says the number of new arrears cases has stayed constant at around 54,000 each quarter since early 2007 it maintains that consumers are increasingly struggling to clear their arrears and consequently the total number of accounts in arrears is increasing.

At the end of Q2 there were 312,000 loan accounts in arrears an increase of 3% on Q1 2008 and 16% up on a year earlier. The total amount of arrears now stands at £1.6bn.

Hi John

I had just copied a link to post on this very subject but you beat me to it. I would confirm again that my workload on this area has increased massively in the last 6 months or so, a very worrying time for all concerned.

Regards.

heltenham & Gloucester have announced they will no longer allow borrowers to switch from repayment to interest only mortgages.

Not being financially minded, what is the reasoning for not allowing the change?

I think a lot of lenders are disallowing the move from repayment to interest only at the moment. This is because the interest only option does not repay anything off the capital sum borrowed, so at the end of the mortgage term you are left owing the mortgage company the full amount, which may only be achieved by a sale of your home - at a time when you will be much older and new mortgage options less likely.

For anyone considering moving their mortgage from repayment to interest only, this should only ever be done on a temporary basis, and there needs to be a clear plan for how the capital elements can be caught up with in the future.