Householders with troubled credit histories are being forced out of their homes because of the “irresponsible” actions of “sub-prime” lenders, according to claims made yesterday.

In a damning report, the Citizens Advice Bureau said that irresponsible lending decisions and “aggressive arrears management” by sub-prime lenders was causing increasing numbers of homeowners with credit problems to miss mortgage payments or to have their homes repossessed.

Numbers of home repossessions, already at a seven-year high, are expected to rise by 50 per cent this year to 45,000, according to the Council of Mortgage Lenders (CML).

Sub-prime lenders are responsible for a greater proportion of repossessions than their share of the mortgage market and, in some regions, are responsible for ten times more repossessions than leading lenders, figures show.

Citizens Advice also attacked sub-prime mortgage brokers, saying that some of their advice was “dubious”. In some cases, they had failed to check that borrowers would be able to afford monthly repayments.

One in five people who sought advice on mortgage or loan arrears from Citizens Advice relied on means-tested benefits, while a third had household incomes below the UK poverty line. A childless couple with a weekly income of £217 would be on the poverty line. Tenants encouraged to buy their council flat under the right-to-buy scheme were particularly vulnerable to rogue brokers and bad lending decisions.

Nearly 60,000 people sought advice on mortgage and loan arrears from Citizens Advice in the year to April 2007, and it expects next year’s figures to be even higher.

David Harker, its chief executive, said: “Far from providing housing security and a valuable asset, home ownership has proved a fast track to debt and homelessness for many vulnerable borrowers on low incomes.” Citizens Advice criticised lenders for being too quick to take action when borrowers fell into arrears. It said that constant demands for money and mounting default charges encouraged some homeowners to take out additional loans to cover the cost, driving them even deeper into debt.

Lenders reacted angrily to the report, with the CML calling it “simplistic”. It comes just days after some sub-prime lenders and brokers told The Times that increasing numbers of sub-prime borrowers were going to find it difficult to secure new mortgage deals, leading many into a forced sale of their home.

The row came as worries over rapidly worsening conditions in the housing market were fuelled by figures from both the Bank of England and the CML showing that mortgage affordability for homeowners across the board continued to worsen in October. The Bank reported that, as 1.4 million people face the expiry of cheap, fixed-rate mortgage deals next year, many lenders whose own finances have been strained by the global credit squeeze are actually raising interest rates on new fixed-rate loans.

These increases in the cost of fixed-rate mortgages come despite the fact that two-year swap rates, a key factor in determining the cost to lenders of financing these deals, have actually fallen by 0.77 per cent since June. The Bank said that the average interest rate on a new fixed-rate loans edged up to 6.08 per cent in October.

The CML’s figures, meanwhile, showed that the average percentage of incomes needed to service a mortgage climbed to its highest level for 16 years in October. First-time buyers needed a typical 20.6 per cent of income to cover interest payments, the highest figure since 1991, while other movers needed 17.6 per cent, the highest since 1992.

One of the City’s leading economists said that betting in derivatives markets pointed to house prices falling next year by as much as 10 per cent in real terms in a decline that appeared to have already begun in most parts of the country.

David Miles, chief UK economist at Morgan Stanley and a former independent adviser to Gordon Brown as Chancellor, said that this would not necessarily be a bad thing.

“It’s not like the plague,” Professor Miles said, arguing that in reality falls in house prices simply redistributed wealth in favour of first-time buyers and existing homeowners seeking the trade-up. He added that a decline of

7 or 8 per cent in residential property prices next year, or 10 per cent after inflation, would only leave prices back where they were at the end of 2006.