The number of landlords falling behind on their mortgage repayments has soared by 50% as the buy-to-let boom turns to bust.
According to Council of Mortgage Lenders (CML) data, the arrears rate in the buy-to-let sector was 1.58%, exceeding the whole market rate for the first time since CML records began in 1998.
The CML figures also showed home repossessions in the third quarter were up 12% compared to the previous three months, to 11,300, and the number of borrowers who were more than three months in arrears also rose, by 8% to 168,000.
The number of buy-to-let borrowers falling into arrears was up to 18,000 in the three months to the end of September, from 12,000 in the previous quarter.
Landlords were finding it increasingly difficult to pay their loans because of falling rents and over-supply in some areas, according to the CML.
The CML said the traditional "exit strategy" of selling up if they get into difficulties has been curtailed as buyers dry up.
CML figures showed 900 properties owned by buy-to-let investors were repossessed in the third quarter, the same as in the first and second quarters of the year. But this resilience was "unlikely to be maintained" in the future, the CML said.
The Royal Institution of Chartered Surveyors (RICS) said the increased rate of buy-to-let borrowers going into arrears on their mortgages was "ominous".
Simon Rubinsohn, RICS chief economist, said: "The latest RICS survey of the residential lettings market shows rents are now declining which, if persistent, could exacerbate the pain in this sector."
As unemployment rises and low-interest rates come to an end, more people have struggled to meet their mortgage repayments. The rise in the number of households falling behind on their mortgages was larger-than-expected, prompting the CML to warn that "in a worsening economy, the number of households in arrears by the end of the year is likely to exceed the previous forecast of 170,000".
Ministry of Justice figures, showed 29,516 mortgage possession orders were made in courts in England and Wales by all lenders in the third quarter, 24% higher than in the same period in 2007.
However, almost half were suspended and not all of them will lead to a home being repossessed.
Housing Minister Margaret Beckett said: "We are determined that households should have access to as much help as possible to cope in the tougher times ahead, and we will do everything we can to ensure repossession is always a last resort."
She added: "Lenders need to be doing everything they can to help families facing difficulties."
The number of people who have lost their homes has been steadily increasing since 1996 and if the CML's prediction of 45,000 repossessions in 2008 proves to be right, this would be the highest figure since 1995.
CML director general Michael Coogan said lenders would "look at every possible way of minimising repossessions", which is why the forecast number of people expected to lose their homes had not changed, despite the rise in arrears.
"Most borrowers who face payment problems successfully keep their home by working with their lender - anyone worried about mortgage payments should contact their lender at the earliest opportunity, before arrears start to build up," he said.
He said the Government had taken "some helpful steps" to support vulnerable households, but urged ministers to go further.
The Government has launched a range of initiatives to help people who cannot keep up with their mortgage to stay in their home.
These include enabling them to sell their home and rent it back from a social landlord, or enter into a shared equity or shared ownership scheme on their property.
A new pre-action protocol also came into force on Wednesday in which the courts must stop repossession actions unless all alternatives to keep people in their home have failed.
Liberal Democrat Treasury spokesman Vince Cable said: "It is clear that in the face of this recession more and more families are simply unable to make ends meet.
"Even with falling food and energy prices, some families have already been stretched to breaking point by colossal debts and the high cost of borrowing. The steep rise in the number of people in arrears makes it highly likely that a flood of repossessions is just around the corner."
He added: "There is a real danger that Government proposals to prevent repossessions have not gone far enough. Following this month's landmark ruling there is a danger that some unscrupulous lenders will simply bypass the courts.
"We must ensure that people's homes are only ever repossessed as an absolute last resort."
The Insolvency Service published figures earlier this month which showed that 27,087 people were made insolvent during the third quarter, 8.8% more than in the previous three months.
They also showed that a record 17,341 people were made bankrupt during the period on a seasonally adjusted basis.
The figures published by the CML cover arrears and repossession data for its members across the UK. It is the first time that the group has published this data on a quarterly basis. The CML said it had decided to release the figures every three months to bring it in line with the Ministry of Justice figures.
