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Debt warning as rising numbers face threat to their homes

· Advice calls for lenders to take more care
· Stretched first-time buyers vulnerable to repossession

Debt campaigners gave warning yesterday that a growing number of borrowers were unable to meet their mortgage repayments, with many of them first-time buyers who only recently climbed onto the property ladder.
Citizens Advice said about 770,000 people had missed one or more mortgage repayment in the past year. Nearly two million said they were concerned that their finances may not stretch to cover their monthly debts.

The charity urged lenders to take more care when sanctioning loans to young people, who were often encouraged to buy property when their finances remained unstable. A Citizens Advice study found that younger people were the most likely to fall behind on financial commitments, with 13% of those aged 21 to 24 missing a home loan payment.

Runaway property prices have made homes in many areas unaffordable for first-time buyers. Many stretch their finances to get a first foot on the ladder.

Last year the charity helped to deal with 1.25m debt problems and received 87,000 inquiries about actual or threatened homelessness, with a further 51,000 about mortgage and secured loan arrears.

David Harker, chief executive of Citizens Advice, is "very concerned" at the numbers involved. "Missing payments on mortgages or secured loans could lead to arrears and possibly repossession," he said. "There's a clear need for more information and advice about the consequences of taking on financial commitments, particularly for younger adults."

One example of the rapid slide towards financial insecurity is the tale of Keith Cotton, 54. He found himself in mortgage arrears after his business collapsed. Before he called in the official receiver, he had what many would regard an idyllic life - living in a large house in the Mendip hills in Somerset with his wife and six children.

He set up a new venture with a friend after a successful career selling computer software. Two years later, and £200,000 lighter, he was waiting in a queue at a citizens advice bureau, desperate for help to stop the Nationwide building society from repossessing his home.

"If the CAB hadn't negotiated with the Nationwide, I'd be in living in bed and breakfast now or in a council house somewhere," said Mr Cotton. "A mortgage is a huge responsibility when you have a family. Even now, my wife feels insecure because if something goes wrong, no matter how much you have paid into the system, there's no support from the government."

Mr Cotton secured another job, but was soon made redundant. He now has a suspended repossession order against his home and a payment plan until the mortgage is paid off when he is 65.

Citizens Advice said many people failed to understand secured lending. Lenders sell insurance to cover repayments, but campaigners say the policies are expensive, and accuse the lenders of profiteering. Like many home owners, Mr Cotton relied on social security, which covers mortgage payments only after several months.

Among those who bought secured personal loans, 11% of the 2,057 adults surveyed wrongly thought their homes would be safe if they missed repayments.

http://money.guardian.co.uk/creditanddebt/story/0,,1871179,00.html