Dozens of fledgling property companies specialising in buying homes from homeowners struggling with mortgage repayments have started up in recent months in another sign of the growing level of indebtedness in the UK.
There are now more than 200 companies that buy houses at discounted prices from distressed homeowners. In some cases, the companies rent them back to the sellers.
Often, these companies agree to buy homes for 70-80 per cent of their market value and pay all relevant fees and costs. In return, sellers can rent their homes for less than their previous monthly mortgage payments.
“A year ago, we had about 20-25 competitors in this sector. Now we have more than 200,” said Keith Woodward, a spokesman for Approva Homebuyers.
“There’s a growing level of debt in this country. People are using their houses like a blank cheque and we’re at the receiving end.”
However, consumer bodies are urging homeowners to view these companies with caution as standards can vary widely and customers have little protection as the sector is unregulated.
Analysts warn it is not uncommon for unscrupulous companies to establish a tenancy agreement with a client and then evict him or her if the property can be resold at a gain.
“It seems to be yet another indicator that we as a nation are becoming overstretched,” said John Howard, chairman of the Financial Services Consumer Panel.
He recommends that consumers should hire independent solicitors and surveyors and not rely on those supplied by these unregulated companies, which often offer to pay legal fees and surveying costs.
The growing popularity of companies targeting homeowners wanting to avoid repossession or bankruptcy underscores how rising interest rates are putting further pressure on people struggling to pay debts.
The number of individual insolvencies in England and Wales reached record levels in the first quarter of 2007, topping 30,000 – up 24 per cent year-on-year, according to government figures.