A new call is being made for local councils to be able to step in to help homeowners whose properties may be repossessed because of the current economic climate. The case is being put forward in a paper just published by the New Local Government Network which has also written to the Minister of Justice asking for requirements to be drawn up for lenders to work with councils to avoid repossessions.

The paper coincides with a warning from the Council of Mortgage Lenders that repossessions are set to soar and as estate agents are highlighting how vulnerable to negative equity many homeowners now are. The NLGN research looks at how repossessions bring stress to all family members and how they can lead to long-term poverty, poor health and well-being and affect the emotional state of children and their schooling.

The report argues that it would be in a council’s financial interest in many cases to step in, avoiding the need to provide alternative housing and to meet other social and economic costs. This, the report suggests, could be done through loans, shared ownership, shared equity or sale and rent back schemes. Many local authorities, it says, are already positioning themselves to respond to the challenges of the credit crunch, with some setting up credit crunch task forces.

James Hulme, Head of Communications for NLGN, said repossessions meant renewed stress on homeowners and he added, “This could be a real opportunity for local government to step in and help prevent social and economic dislocation in their areas by providing loans or taking a share of the equity of some of these homes.”