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City experts today warned that Britain was on the brink of a mortgage crisis as tens of thousands of households struggle to repay home loans.
New figures suggest as many as 400,000 households could be failing to make mortgage repayments on time by the end of the year.
The grim warning came as Lloyds Banking Group became the latest high street bank to report a surge in the number of borrowers three or more months behind in repayments.
Lloyds reported losses of £4 billion for the first half of the year after it saw toxic debts balloon by more than five times to £13.4 billion.
Chief executive Eric Daniels blamed the losses on the shocking state of the finances at troubled HBOS, which was taken over by Lloyds in a deal orchestrated by Gordon Brown.
The group is 43 per cent owned by the taxpayer who is now nursing a heavy loss on its investment.
Lloyds said 83,153 customers were behind with repayments at the end of June — up 26 per cent in six months. Nationalised bank Northern Rock yesterday reported a 28 per cent surge to 22,141 and Royal Bank of Scotland is due to announce figures on Friday.
Many of those in trouble were similar to the high-risk sub-prime borrowers at the heart of the credit crunch and global financial crisis.
In June, the Council of Mortgage Lenders forecast 360,000 households to be more than three months behind with mortgage repayments.
But Ed Stansfield, housing expert at Capital Economics, today said that number will hit 375,000 or more.
The sudden rate of increase revealed by high street banks this week suggests it could be as much as 400,000.
Mr Stansfield said: “The big picture when you look at the state of the economy is that unemployment is rising and some of the types of lending which took place during the housing boom means that many households are now in trouble.
“The risk is that this creates a problem that matches or even exceeds that seen during the housing crash of the early Nineties.”
The figures from Lloyds show that of the 83,153 customers struggling with their mortgages, 57,029 were low risk “prime” borrowers, 9,513 were buy-to-let borrowers, and 16,611 had subprime or self-cert loans, also known as “liar loans”.
Mr Daniels said: “2008 was a difficult year for the banking industry and the first half of 2009 proved no less challenging. While the environment will remain challenging, management expects the economy to stabilise in the second half and start recovering slowly in 2010.”
Lloyds now expects house prices to fall by seven per cent this year against its earlier forecast of a 15 per cent slump.
Northern Rock yesterday reported losses of almost £725 million after it wrote off more than £600 million in bad loans.
Lloyds, for years seen as a safe bank, merged with the far more aggressive HBOS last year to save the Halifax and Bank of Scotland owner from collapse.
Barclays and HSBC, which did not require government bailouts to survive the financial crisis, this week reported combined profits of £6 billion driven by their strong investment banking businesses.
The shocking figures on mortgages came on an otherwise good day for economic news. The Halifax's house price index showed a 1.1% rise in prices last month, which followed a 1.3% increase shown by the Nationwide for July last week.
Reader views (13)
You ain't seen nothing yet! Inflation and just wait for those mortgages to rise before more and more jobs go in communist Britain. £175 Billion in quantitative easing "printing money" Wiemar style will bring about mayhem within the scrounging classes.
- Mike, London
Yeah! If you feed the pig he gets fat. If you over feed him he will sleep all day. Then if you take his food away he will snarl and bite. The pig dosnt love you he only takes what you give. But what we all forget is that we can all take away from the pig what he needs and destroy or force him our bidding and will..Without the food of our savings that pig shall die.. We must all now work as a collective and not be divided and conquered.The revolution starts Today!
- Ike Maslen, chelmsford
Statistics and lies.
More spin and waffle from mortgage lenders.
The banks could not care less about Joe Public losing their job and losing their home, losing their self-respect and finishing up sleeping under the railway arches in Charing Cross.
As far as I can determine, nothing has changed with the greedy banks. The bonuses increase on par with MP's expenses every week.
Just remember all you bloated fat-cats (who cannot make ends meet on GBP40,000.00pa) a pensioner in the UK is very lucky to get GBP6760.00pa to exist on - the LOWEST state pension in the civilised (?) world.
- Reuben Camara, Republic of Morecambe, UK
And don't forget, mortgage rates in the late '80's and early '90's reached 15.4%! Today, we're looking at a Bank of England rate at 0.5%. There can only be one outcome but, of course, the green shoots will win.
NOT.
- Twizzle, Isle of Wight
So many mortgages have been gained by lying to the stupid lenders.
Both sides are greedy.
- Michael, Kensington, UK
Good heavens! I thought houses were going up in price again. Ha! Ha! Ha!
- Baz, London UK
This is in the "good" times... Today we have the lowest rate of interest in years and so the mortgage burden has reduced for most families. Unemployment is growing and as soon as the banks have built up enough liquidity, they will not hesitate to clamour for higher mortgage rates and this will thwart those hanging on. The banks greed will ensure this figure grows. If they can make money on reposessing a house then they would have no qualms whatsoever to force possession to make money to pay back the government loan and be able to give themselves ever growing bonuses at our expense. So far the Government has done nothing to stop the clear greed of these banks. For the billions of bailout money the voting and tax paying public have secured nothing.
Given the banks selfish actions to date, the government should halt the asset protection program and let the banks struggle like the rest of us.
Let's have an election now to find out how the public feel about the use of this money.
- Stephen, Swindon
Raise taxes and enact new laws. Seems to be the government solution to everything else.
- Trunk, US
Yes, Alan, good idea let's go back to the Poll Tax! Strange how they rioted in them days but not today. The middle class are obviously either too nice or too repressed. More like too depressed.
Of course the repossesions problem is a vicious circle. Banks stop lending to small businesses who have to lay of staff etc etc etc
- Sally-Anne, Brentwood
SIMPLE SOLUTION,GET RID OF THE COUNCIL TAX THOUGHT UP BY THE RICH. HOW ANY COUNTRY IN THEIR RIGHT MINDS CAN EXPECT A FAMILEY ON 40 000 TO PAY THE SAME TAX AS THOSE EARNING 90 000 IS BEYOND REASON.
- David, london
Sad, very sad. this includes members of my own family. It is hopeful taht debt repayment plans can be renegotiated, extended or interest only payment plans made for a period of time.
It is just hoped the Banks and Mortgage Lenders don't see this as a means of hiking interest and other charges so they can use their customer base as an ATM to cover their own losses. But it is feared this is what many Banks will do, hike interest charges and make life difficult for those in arrears with direct threats of reposessions, Bailiffs and Court Orders.
It will be all about their 'Bottom Lines' rather than social responsibility.
- Uncle Vanya, East Anglia Area UK
Extend the times to pay back loans, increase savings rates to entice savers and reduce house prices to their correct level of 3.5x average single income.
Otherwise, disaster for the economy next year.
- Darius, London UK
Those who think we're out of the woods, need reminding that we aren't even IN the damnable forest yet.
- Ted, London
