Debt charities have criticised a High Court ruling, which has given mortgage lenders the green light to repossess homes of customers without needing to apply for a court order.

The High Court supported a decision by GMAC-RFC, the mortgage lender owned by troubled US car giant General Motors, to take control and sell off the property of a borrower who had fallen into arrears. It confirmed that mortgage lenders can sell a property if a borrower falls just two months behind with payments, without needing to seek a repossession order from the courts.

Experts said the ruling sets a dangerous precedent, supporting the right of lenders to repossess properties at will, without proper checks and balances.

Francis Walker, of Consumer Credit Counselling Service, a debt charity, said: "This case is shocking and extremely disappointing, particularly in light of the Government's new protocols announced last month. The fear is that the practice could become more widespread as the housing crisis worsens."

The case in question related to a buy-to-let mortgage and experts argue that it was unlikely that lenders would use the legal power in cases involving a residential home loan. However, they accepted that it was an option open to any lender.

John Gallagher, principal solicitor at Shelter, the housing charity, said: "It is quite incredible in the 21st century that the law allows a lender to choose whether or not to take possession proceedings and that the borrower then becomes a trespasser in his or her own home.

"Even where a mortgage possession case does go to court, the law related to mortgages is heavily weighted in favour of the lender and the court has only limited powers to intervene. The law is need of thoroughgoing reform to render it fit for the modern world. We would urge the Government to undertake this reform as a matter of urgency."

The case dates back to 2006 when GMAC-RFC appointed receivers after the borrower fell into arrears. The receivers subsequently sold the property at auction and it was passed to Horsham Properties, who won an eviction order last month against the former homeowners.

A spokeswoman for GMAC-RFC insisted that it if it was a residential home loan it would not have called in receivers. However, it said that in the case of buy-to-let loans there was a long-established precedent of calling in receivers when borrowers fell into arrears.

Meanwhile, the Ministry of Justice said the Horsham case confirmed a long standing right of a mortgage lender to sell a property without a court order, which dates back to 1925. However, it said such cases were rare because borrowers cannot generally be required to leave the property without a court order.

The ruling comes at a time when the number of homeowners slipping into arrears on their home loans is predicted to soar. The number of repossessions is expected to jump by 50 per cent to 45,000 this year, according to the Council of Mortgage Lending.

Last month Gordon Brown announced new rules which require lenders to look at all other alternatives before seeking a repossession order through the courts, to ensure that it remains "the last resort" for lenders. But some banks have been accused of still taking an aggressive attitude on repossession.