The number of property repossessions is likely to soar next year as the end of the decade-long house price boom brings pain to overstretched borrowers, the country’s mortgage lenders said yesterday.

The Council of Mortgage Lenders (CML) predicted that there would be a 50 per cent increase in repossessions in 2008, as well as rising levels of arrears and a fall in house prices in real terms.

Hardest hit would be borrowers in the “adverse credit sector”, the British equivalent of the US sub-prime area, who are facing a large increase in their monthly payments.

As new official figures gave the clearest sign yet that a prolonged slowdown in house prices was now under way, there were warnings yesterday that the Government’s tax changes could prompt an exodus of the wealthiest homeowners with repercussions throughout the market.

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The CML considered the market so unpredictable in the wake of the summer banking crisis that it delayed its 2009 forecast of house price growth. But it said that prices would be static over the coming 12 months and were likely to go up by just 1 per cent in 2008, well below inflation.

Repossessions would increase from 30,000 this year to 45,000 next year, the CML said — levels not seen since the mid-1990s.

Lenders have tightened their criteria after the credit crunch, and people with high loan-to-value ratios, stretched income multiples or poor credit records could find it harder to refinance their mortgages. In addition, interest-rate rises since August 2006 and the high number of people coming off fixed-rate deals would add to the tightness of the market.

The CML, which speaks for almost every large mortgage lender in Britain, said: “Borrowers facing difficulties should speak to their lender at the earliest opportunity. Lenders have a number of tools available to help borrowers with payment difficulties and will work constructively with each borrower on an individual basis.

It is in a lender’s interest to keep borrowers in their home, if at all possible. But some increase in the number of possessions is inevitable.”

In another sign that the housing market is cooling rapidly, the Bank of England reported yesterday that approvals of new home loans dropped last month to the lowest level for two years. The number of approvals fell to 102,000 in September, down from 108,000 in August, and almost a fifth lower than at the same time last year.

But the data also showed robust credit-card borrowing and bank loans, suggesting that consumers were getting deeper into debt to bridge the gap between weak earnings growth and their spending.

Alan Sampson, the chief executive of Shelter, said that the CML’s figures would “set alarm bells ringing for hundreds of thousands of homeowners across the country”. He said: “In fact, the impact on homeowners could be even more severe than the nightmare of the early Nineties as the current safety net for people facing repossession is significantly worse than it was then. Given the Government’s willingness to jump to the rescue of Northern Rock, they should now show the same compassion to those facing mortgage difficulties and save thousands of homeowners from the devastating effects of repossession and homelessness.”

But another recent move by the Government could remove a key plank of Britain’s housing strength. A new £30,000 annual charge hanging over wealthy foreigners living in the UK is causing some to consider relocation. Noel Flint, of the Chelsea office of Knight Frank, the estate agents, said that some of his resident non-domicile customers see the charge as the “thin edge of the wedge”, or the start of the gradual erosion of their valuable tax concessions. Knight Frank is now forecasting that annual growth in the prime Central London market, which fuelled price rises, will be just 3 per cent in 2008 — against an average of 32 per cent this year.