The number of home repossessions hit an eight-year high last year. Figures released today by the Council of Mortgage Lenders shows that 27,100 homes were repossessed by lenders last year after homeowners failed to meet their mortgage repayments. This is 21 per cent higher than in 2006 and represents 0.23 per cent of all home loans, the highest percentage since 1998.

The Ministry of Justice also released figures today showing that a total of 35,662 mortgage possession orders were made through the courts in England and Wales during the final three months of 2007, 2 per cent up on the previous quarter and 14 per cent higher than in the fourth quarter of 2006.

Homeowners have increasingly been feeling the strain of more expensive mortgage payments after five interest rate rises and only one rate cut between August 2006 and January this year. Other household bills, including the cost of energy and food, have also been rising.

Yesterday, homeowners received some temporary relief from the Bank of England's Monetary Policy Committee, which cut the cost of borrowing by a quarter point to 5.25 per cent, the second cut in three months.

A raft of mortgage lenders immediately said that they would pass on the interest rate cut in full. Halifax, Nationwide, Abbey and Royal Bank of Scotland/NatWest were among those to confirm a 0.25 per cent reduction in their standard variable rates.

However, the level of repossessions is expected to continue rising during 2008 as a combination of higher interest rates and stretched household budgets take their toll on people’s ability to afford their mortgages.

The global credit crunch is also affecting homeowners as a lack of funding forces lenders to tighten their lending criteria, making it difficult for some borrowers, particuarly those with blemished credit histories, to remortgage, while others will be charged higher rates.

A leading estate agent said this morning that a significant proportion of all home sales that had fallen through in recent months was a result of mortgage lenders refusing to lend money to potential buyers without substantial deposits.

The problems in the mortgage market will be exacerbated when almost 1.4 million homeowners due to come off fixed-rate deals this year re-mortgage to new deals. These homeowners are likely to see an average monthly increase of more than £100 in their repayments.

Howard Archer, of Global Insight, said: "The financial pressure on many homeowners is increasing, and it seems certain that repossessions will trend up significantly during 2008, particularly if the economy suffers an extended marked slowdown and unemployment starts rising."

The CML has forecast that repossessions will rise by more than 50 per cent to 45,000 next year.

The CML has also written to the Government to urge it to boost the state support for people who fall behind with their home loan payments. In the letter to Kitty Usher, Economic Secretary to the Treasury, Micheal Coogan, Director General of the CML, wrote: "The Government needs to play its part by improving state support arrangements."

He was at pains to point out that lenders treat those who fall into mortgage arrears in a fair manner. "Lenders understand the importance of treating their customers fairly, particularly those who get into financial difficulties."

The CML said the repossession figures were 10 per cent lower than it had previously estimated, and much lower than the high of 75,540 repossessions reached during the house price crash in 1991.

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