Record  numbers of hard-pressed British householders are facing the nightmare scenario of losing their homes as the credit crunch bites harder.  As property prices start to plummet and the mortgage market melts down, many borrowers are increasingly finding themselves in a vice grip of nose-diving negative equity and rising loan repayments.

Too alarmist?  Sadly  probably not.  Actually the repossession figures have been making increasingly grim reading for the past couple of years, but most people haven’t paid attention until recently because most other things in the garden have been looking quite rosy.

But times are changing,  and fast.  The respected Halifax and Nationwide surveys have confirmed that UK house prices are now actually declining on a year-on-year basis.  And mortgage lenders, who until very recently seemed happy to advance vast loans on massive income multiples to virtually anyone who could tell a semi-plausible tale about his or her income – well the shutters have been put up and the cashpoint almost closed.

With 1.4 million fixed-rate mortgages set to end this year, the government has unveiled at £10 million package of support for homeowners at risk of repossession. The number of homeowners facing legal action because they can't keep up their mortgage payments has soared by nearly a fifth  over the last year.

Chancellor Alistair Darling says the package includes £9 million funding for face-to-face debt advice provided by third sector partners including Citizens Advice Bureau.

The support initiative also includes free legal representation at county courts throughout England for households at risk of repossession. The government says it is now looking at additional ways of offering debt advice to people.

Six major UK retail banks -  Lloyds TSB, Barclays, Royal Bank of Scotland, HBOS, Abbey and HSBC - have all agreed to work closely the government to investigate how best to help customers. They are also considering whether banks could provide extra financial support for struggling borrowers.

The Council of Mortgage Lenders has forecast 45,000 repossessions in 2008 – 124 cases a day - up from 27,100 in the previous year.  This figure was made in October, in the early stages of the credit crunch, and a spokesman for the CML says a revision could be imminent to take into account the increasing pressure on homeowners.

Even after a county court has made a possession order, a family can still negotiate a deal to stop repossession.
 
Last year, for example, there were 95,187 orders but only 27,100 repossessions.

The CML says there are 11.8 million outstanding mortgages in the UK.

Michael Coogan, director general of the CML, says: "No one wants to see repossessions rise. But risk is a part of life, and for some households circumstances change and they cannot get back on their feet.
"However, most people who suffer payment difficulties can get out of trouble by taking good advice, prioritising their debts, and communicating with their lender early."

In the past, lenders have come under criticism for being too quick to issue possession claims on borrowers with mortgage arrears.
 
Sue Edwards, of Citizens Advice, says: “We have seen a sharp rise in the number of people coming to us with mortgage arrears, and evidence that in too many case lenders are using court action as a first rather than a last resort."

“Many Citizens Advice Bureaux run county court advice desks.  Research has shown that getting advice – even at the eleventh hour – can help the majority of people come to a workable agreement with their mortgage lender so we welcome the government’s announcement of more money for court advice desks.”

For the moment repossession levels are still way below the horror story heights of the early  1990s when the annual numbers of ‘orders made’ exceeded 1000,000 for four years, peaking at over 140,000 in 1991 with almost 76,000 of those cases resulting in the property being lost.

Housing Minister Caroline Flint says  “It is important to recognise we are dealing with an entirely different situation in the market from what was experienced in the early 1990s,"

"The fundamentals of the housing market remain strong with high employment, low interest rates, and long-term demand for homes from first-time buyers."

There were 38,688 possession claims made in the first the months of 2008 – that is the initial process of repossession, whereby the claim is made in a county court to begin action.

The figure was seven per cent higher than the previous quarter and up by 16 per cent compared to a year ago.

Between January and March in England and Wales, a staggering 27,530 families - or 300 every day - reached the brink of being homeless.

A mortgage repossession order is granted by a court and entitles the claimant – usually a lender –to apply to have the occupier evicted.  A claim is issued in the county court and begins an action for a repossession order.

Overall, the number of these orders between January and March is more than 17 per cent higher than the same period last year.  It is also a 9 per cent rise compared to the last three months of 2007.

The number of both actions are at their highest level for at least 6 years.
They have climbed sharply during the past 6 months as the higher cost of mortgages hit home owners following a series of interest rate rises last year.

They saw many homeowners having to re-fix their mortgages at significantly higher mortgage rates as the cheap fixed loans that they took out several years ago expired.

Mel Mitchley, director of industry relations at credit reference agency Callcredit, said the repossession figures were part of a wider picture of gloom for borrowers.

"The rising cost of living is clearly hitting home and consumers are becoming increasingly concerned about their financial commitments. At Callcredit we've seen a 20% rise in the number of consumers checking their credit report in a bid to better manage their finances."