First-time buyers set to bear brunt as repossessions rise

TERRACED houses will account for four in ten Scottish households to be repossessed this year, as the number of families losing their homes begins to rise again.

New research has predicted that 3,279 homes will be repossessed in Scotland this year, with low interest all that prevents thousands more families from losing their homes.

The figure is 0.33 per cent of live mortgages in Scotland, compared with a 0.30 per cent average for the UK as a whole, according to a study by financial outsourcer HML, which provides the only breakdown of UK repossessions by area.

Researchers looked at 15,000 Scottish mortgage accounts and used data including debt levels, credit facilities and payment history to predict borrower behaviour. Of the properties expected to be repossessed north of the Border in 2011, terraced homes account for the biggest proportion, at 39 per cent (1,267 homes).

Flats - which for the purposes of the research included tenements - are predicted to account for 19 per cent of Scottish repossessions, while 18 per cent are expected to be from detached properties. HML said semi-detached properties will account for 24 per cent of repossessions, equating to just over 800 homes.

Neil Warman, chief commercial and finance officer at HML, said flats and terraces are most at risk of repossession because they tend to be the choice of first-time buyers without a track record of mortgage repayments.

"However, all borrowers have to contend with the rising cost of living, employment uncertainty, stagnant wages and the fall-out from the largest cuts to government spending for more than a generation," he said.

HML expects just over 33,000 homes to be repossessed across the UK in 2011, but Warman said the figure was set to rise in 2012, when he expects between 35,000 and 40,000 repossessions in the UK. "There is already evidence that these factors are starting to impact on homeowners, as there has been a moderate increase in the number of borrowers whose arrears represent more than 10 per cent of the value of their mortgage."

The Council of Mortgage Lenders forecasts 40,000 repossessions this year, up from 36,000 in 2010.

And repossession rates in Scotland are set to outstrip the rest of the UK, Shelter Scotland has warned. The homeless and homelessness charity is braced for a surge in repossessions over the coming months after a court case last year led to 5,000 repossession cases before the courts in Scotland being withdrawn. Those cases have been restarted and many are now being processed.

Graeme Brown, director of Shelter Scotland, said: "Our money and legal advice services are already in greater demand and we are seeing an increase in repossession cases.Lenders must only use repossession as the absolute last resort.

"Just a small increase in monthly outgoings could be the trigger that finally pushes some people over the edge into a spiral of debt, repossession and possible homelessness."

• Shelter Scotland yesterday revealed that the Standard Life Charitable Trust is to fund a new full-time money adviser on its helpline (0808 800 4444), which received more than 19,000 calls last year.