The number of homes repossessed during 2006 rose 65 per cent compared to the year before, figures from the Council of Mortgage Lenders (CML) have shown.

A total 17,000 homes were seized over arrears last year, “broadly similar” to 2001 repossession levels of one in every 690 mortgages.

This is expected to rise to 19,000 over the course of this year and to 20,000 by the end of 2008 said the CML, as the most financially stressed homeowners struggled with rate rises.

“The arrears picture at the moment is fairly complex,” commented Michael Coogan, CML director general.

“On the one hand, the wave of problems caused by previous interest rate rises has now worked through, so recently arrears levels have fallen.

“On the other hand, interest rates are rising again, and payment shock may be an issue for some this year as their existing fixed or discounted deals expire.”