The Financial Services Authority (FSA) has warned that more than one million families are in danger of losing their home over the next 18 months. The pain of debts and huge mortgage repayments may be too much for homeowners due to the credit crunch. As banks become more wary, many coming out of a fixed-rate term on their home loan will find they cannot switch to another cheap deal. With this in mind, even small increase in bills or interest on repayments may be too much. Other debts such as personal loans, credit cards and overdrafts could cause the scales to weigh against homeowners.

A recently published report does offer some consolation with the recommendation that local councils should help out those feeling the squeeze of the credit crunch.The FSA suggests that nearly one-fifth of those who took out a mortgage and home insurance between April 2005 and September 2007 risk having their property repossessed. This group of 1.04 million includes those who took out their first home loan, and those who remortgaged from one deal to another.

The FSA also identified certain risk factors that placed certain homeowners in more vulnerable a position than others and which could complete the miserable cycle of debt. The factors are: putting down a deposit of 10 per cent or less on a home; taking a mortgage for longer than 25 years; or borrowing more than 3.5 times the customer's annual salary. Those who have all these high risk factors are more likely than not to have their homes repossessed.

Some experts however believe that the credit crunch will not hurt those who have mortgage products for people building their own home. Jason Orme, the editor of Homebuilding.co.uk, states that although it was thought the credit crunch would impact on the self-build mortgage market, lenders view new self-build projects as a relative safe bet.

Most homeowners, of course, do not fit in this boat and have to deal with the credit crunch on their own. A new report, however, argues local councils should offer financial support to homeowners threatened by the credit crunch. The report - 'Good Housekeeping? Stronger communities through local housing intervention' - argues councils should adopt US-style mortgage support plans (MSPs). Additionally, authorities are encouraged to offer below market rate, whole or partial mortgages to fight off repossession and eviction – and so propping up the housing market to prevent re-mortgage difficulties.

Under the proposals, councils would be able to borrow money under prudential borrowing rules and offer support to a select group of people, such as first-time buyers or people involved in mortgage difficulties.

The measures will be particularly useful when numbers of mortgage defaults might impact disproportionately on social housing demand in the area, argues the New Local Government Network (NLGN). Those that have been included under the umbrella of the FSA’s risk factors would need particular help and will welcome this news, although with a projected recession and no sign of the credit crunch abating, such changes need to be implemented sooner rather than later.