Nearly half of people having difficulties paying their mortgages do not seek advice, often because they feel their woes are not serious enough or do not know where to go for help.
The Financial Services Consumer Panel, which produced the figures, said there was an ‘urgent need’ for more investment in information and advice.
The panel, which advises the Financial Services Authority on the interests and concerns of consumers, reminded lenders of their duty to help people in arrears and inform them about alternative sources of advice.
‘I am calling on all mortgage lenders to do more to encourage consumers in difficulty to get advice early, before the problem becomes a disaster for both parties,’ the panel’s chairman Adam Phillips said.
Of those who did seek advice, two-thirds went to their mortgage lender, while one in four sought help from Citizens Advice. The panel wants consumers to understand that debt advice agencies must not be seen as a last resort.
The calls for help come after the FSA showed that new repossessions totalled 14,825 in the first quarter of 2009, not only up 13% from the last quarter of 2008, but also 62% higher than a year ago.
New arrears cases fell by 12% in the first three months of 2009, down to 60,000 from the 68,000 seen at the end of 2008.
The government has set up a number of schemes to try to clamp down on repossessions. These include a £200 million mortgage rescue scheme, as well as the implementation of new guidance for the courts to ensure lenders try their best to avoid repossession.
The situation is so bad that MPs on the Treasury Committee are to scrutinise how lenders are treating both households in mortgage arrears and the circumstances around repossessions.
On Tuesday, the committee is set to quiz Lord Myners, Financial Services Secretary to the Treasury, and John Healey, Minister for Housing.
The FSA has said it is clamping down on lenders who poorly handle arrears and repossession cases. The regulator last month said it had referred four firms to its enforcement division for investigation, and was assessing several others.
But campaign group Which? says the FSA should publish the names of lenders that are treating customers in mortgage arrears unfairly. Dominic Lindley, the group’s principal policy adviser, questioned: ‘How will lenders be persuaded to improve their practices, unless the FSA names and shames them?’