For every 500,000 people becoming unemployed there will be a further 20,000 repossessions, says a new report from consultants CB Richard Ellis.
'Loss of income through unemployment is the major contributory factor towards arrears and repossessions,' the report says.
'Although the fear of losing one's home means property owners do all they can to cover the mortgage payments, it can be increasingly difficult for the jobless to cover mortgage payments, particularly as government support does not kick in until 13 weeks after the job loss,' the report continues.
The sub prime market and buy-to-let borrowers are among the most vulnerable in the current economic downturn. An increasing supply of rental properties has led to falling rents and longer void periods which have in turn led to higher arrears. 'We expect this to translate to higher repossessions soon,' it adds.
The report predicts that repossessions will peak at 70,000 in 2009 but in a worse case scenario this could reach 90,000 especially if lenders fails to pass on interest rate cuts or the economic outlook becomes worse than anticipated.
Also the impact of government initiatives to guarantee mortgages for two years is not yet clear.
And the report points out that banks and lenders are reluctant to pass on interest rate cuts. 'High mortgage rates are a particular problem for borrowers coming to the end of their current mortgage deal. These homeowners are finding it difficult to obtain a mortgage on comparable terms and may not be able to afford the higher rates,' it says.
'There are a large tranche of vulnerable borrowers which could increase the severity of the problem,' the report concludes.
