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The number of people who lose their homes because they can no longer pay the mortgage is expected to rise by 67% by the end of next year.
The Council of Mortgage Lenders (CML) said today that repossessions will rise from 45,000 this year to 75,000 by the end of 2009.
It also said the number of homeowners falling more than three months behind with their mortgage repayments will more than double to 500,000 households.
"Repayment problems will worsen against the backdrop of rising unemployment, but lenders and government are working to try to reduce the negative impact on borrowers," said CML director general, Michael Coogan.
He added that while lenders would seek to minimise repossessions, the worsening economic backdrop will mean an "inevitable increase in the number of cases where a sustainable alternative solution cannot be found".
A sizeable share of these reposessions will be properties owned by landlords, which could leave thousands of tenants in danger of losing their homes.
According to a separate report today from price comparison website uSwitch.com, two million people are already considering taking a mortgage payment holiday.
Mortgage lenders often allow borrowers to take a break from repayments for two months a year or more, with the outstanding debt being paid back over the remaining term of the mortgage.
But while a break from repayments will ease homeowner's pain in the short term, it could lead to problems remortgaging later.
"In the current climate, mortgage payment holidays should not be used by those that have been struggling to pay their mortgage, or to keep up with general living expenses for a long period of time," said Louise Bond of uSwitch.
"Some lenders are already withdrawing this facility."
Last month, Halifax stopped offering payment holidays to borrowers who have been made redundant, while Nationwide is considering a new rule that will only allow homeowners with at least 25% equity in their property to take a payment holiday.
Declining mortgage numbers
The CML also said the number of mortgages taken out in November was less than half the number taken out in the same month last year, with total mortgage advances of just £14.6bn, the lowest level since February 2002.
The figure was 22% lower than October and 51% below the same month last year.
"While there is typically a decline from October to November, this is considerably larger than usual," said Coogan. He added that this reflected the current market disruption and the continued deterioration of confidence in the economy.
The CML also said it expected net lending in 2009 to turn negative for the first time since records began in 1964, meaning consumers will repay more on their mortgages than they borrow.
Net lending, which strips out repayments and remortgaging, is expected to dive to minus £25bn. The figure is well down on this year's level of £40bn and way below last year's £108bn - a level the government has urged the industry to replicate next year.
Total advances in 2009 are also expected to be considerably lower at £145bn, down from around £258bn this year and less than half the £363bn advanced in 2007.
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