By Fiona Shaikh
LONDON (Reuters) - Nearly 13,000 Britons lost their homes to repossession in the first three months of this year as the recession deepened, but there are tentative signs things could get better as the year wears on.
The Council of Mortgage Lenders said on Friday the number of home repossessions soared by half in the three months to March compared with the same period in 2008 to 12,800 and were almost a quarter higher than the final three months of last year.
However, separate figures from the Ministry of Justice showed the number of mortgage possession orders -- when courts grant an order for immediate repossession of a property -- fell 39 percent on the year to 17,054 in the three months to March.
Nearly half of the possession orders were suspended.
The CML said its forecast for a near doubling in repossessions to 75,000 this year looked overly pessimistic and that it may need to lower its estimate.
However, analysts said home repossessions were likely to get worse with unemployment estimated to hit 3 million by 2010, while house prices have plunged more than 20 percent from their peak in mid-2007.
"The deep contraction seen since mid-2008, sharply higher unemployment, heightened debt levels, substantially lower house prices and more and more people being trapped in negative equity will all continue to impact," said Howard Archer, economist at IHS Global Insight.
Britain's economy shrank by 1.9 percent in the first three months of this year -- its sharpest quarterly drop in 30 years -- and the Bank of England said this week that any recovery would be slow and protracted.
SLOW RECOVERY
Although many Britons have seen their monthly mortgage payments fall in line with the Bank's rate cuts, large-scale lay-offs by firms across the UK have left many homeowners in difficulty, especially those who bought at the market peak.
The number of loans with arrears of more than 2.5 percent of the mortgage balance rose by 62 percent on the year to 205,300 in the first quarter, the CML said. That was a rise of 12 percent compared with the last three months of 2008.
Rules introduced at the end of last year obliging lenders to repossess homes only as a last resort should help prevent the widespread forced selling of homes that exacerbated the housing market crash of the early 1990s, analysts said.
But it also risked making lenders more reluctant to lend in the first place and could delay a housing market recovery.
"A lack of mortgage credit is going to be a continuing feature of the market, activity is going to remain at historically low levels and prices are going to keep falling," said Ed Stansfied, property economist at Capital Economics.
(Reporting by Fiona Shaikh, editing by Mike Peacock)