Mortgage lenders in the UK are failing to negotiate with their customers when their debt problems reach breaking point, it has been claimed.

According to Citizens Advice, lenders are turning to the courts to resolve issues of repossession as a first rather than a last resort, which has left thousands of families in financial peril.

The charity has insisted that financial service firms ought to treat people with debt management and money problems "fairy" and "sympathetically".

"Our evidence shows that all too often this isn’t happening, which is why we need a ‘pre-action protocol’ – measures to ensure only those cases where no agreement is possible end up in court," a Citizens Advice statement read.

The charity has noted that its staff in England and Wales are increasingly being approached by homeowners under threat of repossession.

Meanwhile, the Association of Business Recovery Professionals recently revealed that 97 per cent of its members expect to see insolvency rates continue to rise in the UK throughout 2008.

The number of mortgage possession claims made in England and Wales was 16 per cent higher in the first quarter of this year than during the same period in 2007, it has been revealed.

According to the latest data from the Ministry of Justice (MOJ), a total of 38,688 claims of mortgage possession were made in the first quarter and 27,530 resulted in court orders being issued.

Many thousands of families are struggling to deal with their debt problems and mortgage arrears are proving a real burden for millions but the MOJ has made clear that not all mortgage possession orders result in homes being retaken.

Official repossession figures are published by the Council of Mortgage Lenders, which recently reasserted its expectation that 45,000 properties in England and Wales will be reclaimed due to debt problems over the course of this year.

Including mortgage arrears, the typical British household has a debt management burden worth just over £57,400, according to Credit Action’s latest data.

The number of repossessions across Britain this year looks set to be almost a quarter higher than was the case in 2007, it has been revealed.

According to data from the Centre for Economics and Business Research (Cebr), this year will see more than 33,000 people lose their homes as a result of serious debt management and money problems.

It is thought by some that the problems within the housing sector are being made worse by reluctance among lenders to offer deals their customers can afford.

"Unless or until this tap of mortgage finance starts to flow again, the outcome will be a reduction in house prices and an increase in repossessions," said Cebr’s managing economist John Ward.

However, Cebr has also noted that the scale of repossession activity this year will not reach the highs witnessed in the UK during the early 1990’s.

Last week, the debt counselling group Christians Against Poverty warned that millions of British families are being pushed to breaking point by their worsening money problems.

British families are reigning in their spending because of the "increased headwinds" they are facing financially, it has been claimed.

According to the latest financial reality index from the Alliance Trust, consumer spending has "finally" began to slow down in light of the credit crunch, falling house prices and rising living costs.

Debt problems are widespread in the UK but until recently Britons were happy to borrow more in order to maintain their lifestyles and to cover their costs, the financial services firm reports.

Additionally, debt management and money problems could be set to worsen for the thousands of British homeowners whose fixed-rate mortgage deal is coming to an end.

"Our measure of consumer wellbeing shows households are facing increased headwinds in terms of their finances," said Shona Dobbie, from the Alliance Trust Research Centre.

"Given the continued strain on household budgets, we expect consumer spending to slow even further in the next 12 months."

Last week, CreditExpert suggested that millions of UK consumers are adding to their debt problems to buy the fashion items that make them appear more affluent than they are.

A number of leading charity groups are expecting to see a surge in the number of people approaching their staff for advice on debt problems, it has been revealed.

Representatives from Citizens Advice and Shelter told the Guardian that they are already being approached by thousands of people each week whose financial problems have spiralled out of control.

The number of Britons seeking debt help has risen in recent years and both charities anticipate that the impact of the credit crunch will see this trend continue and gather pace in months to come.

Adam Sampson from Shelter suggested that maintaining mortgage repayments had become a real struggle for millions of British families and thousands are facing repossession.

"The crunch may force people into higher cost credit use which is unsustainable and it may tip them into crisis point," said Peter Tutton, national debt policy officer at Citizens Advice.

A report from Shelter last week revealed that while average mortgage repayment demands rose by 172 per cent over the past decade, the typical annual salary of a British household increased by 53 per cent during the same period.

Banking groups look to have been given a significant boost to their liquidity but borrowers have been warned to keep a close eye on their own finances.

David Kuo from Fool.co.uk has said that credit consumers need to remain vigilant and concern themselves with their own money problems in the wake of news that the Bank of England is allowing lenders to swap mortgage debt for government bonds.

Mr Kuo suggested that it will still be up to individuals to solve their own debt management problems and to secure the best credit deals on the market.

Banking groups are answerable to their shareholders and not to the government, regardless of the extent to which the chancellor Alistair Darling decides to "nationalise mortgage risk", he said.

"Consequently, borrowers will need to demonstrate that they are good credit risks if they want the best interest rates," the price comparison expert added.

Last week, the Council of Mortgage Lenders made clear its view that the UK’s housing market has been "rapidly worsening" over the course of the past few months.

Buying a new car via an uncompetitive credit arrangement has seen thousands of UK consumers driven into debt, a new report has suggested.

Cars are thousands of pounds more expensive when bought new rather than a few years old and an increasing number of Britons have borrowed money to fund these purchases, according to Car Parts Direct.

As a result, deciding to buy a new car has seen some people locked in to a credit deal that makes it very difficult for them to meet their mortgage bills when they agree a new home loan arrangement.

For many Britons, vehicles represent a status symbol but the firm behind the recent report has suggested that buying an expensive one could lead some families toward serious debt problems and repossession.

"With some mortgage deals set to rise by as much as 40 per cent – many over financed motorists will no longer have a neighbour to impress," read a statement from Car Parts Direct.

Writing in the Independent recently Stephen King, managing director of economics at HSBC, asserted that repossession and debt management problems will continue to increase in the UK in 2008.

The rate of repossession in the UK looks likely to increase further as homeowners struggle to deal with their debt management problems, it has been claimed.

According to Stephen King, managing director of economics at HSBC, the coming months will see the range of mortgage deals on the market will fall and more people unable to meet their repayment demands.

Mr King is convinced that the rapid rise in house prices during the past ten years was down to "easy credit" but as lending practices tighten repossession appears to be a likely fate for thousands of families.

He went on to suggest that the government would be wrong to blame money problems in the US for the issues affecting the British economy.

"In truth, the shock facing the UK economy is remarkably similar to the shock facing the US economy because both countries chose, a few years ago, to do a deal with the debt devil," he wrote in the Independent.

Last week, Liberal Democrat treasury spokesperson Vince Cable warned that the UK could soon be facing an epidemic of repossessions.

Debt problems are hitting home in the south-west of England as tens of thousands of consumers are seeing their financial situation deteriorate, according to reports.

Figures compiled by Experian have shown that in Bristol alone there are now close to 40,000 families whose money problems are so severe that they face having their home repossessed.

Mortgage repayment rates are rising and coupled with ordinary inflationary pressures, an increasing number of people in the south-west are facing debt management disaster, the Bristol Evening Post reports.

"A lot of people are coming off fixed rate mortgages and suddenly finding they are having to pay another £100 or £150 a month," explained Martin Green, director of the Bristol Debt Advice Centre.

He went on to say he hoped local money lenders would avoid seeking repossession until "at least two months’ arrears have built up".

The National Association of Estate Agents recently called for interest rate cuts to help boost the UK’s housing market.

The UK could be heading for an "epidemic of repossessions" unless decisive action is taken by the government to help families with debt problems, it has been claimed.

According to the Liberal Democrat economic spokesperson Vince Cable, more and more homeowners are finding it impossible to keep up with their debt repayment demands and many look set to lose their homes.

Mr Cable has suggested that the interest payments British families are being obliged to pay are so high that in many cases very little cash is left over to cover other household bills.

"Homeowners are having to deal with increased interest payments as their fixed-term mortgages come up for renewal," said the opposition MP.

"Large numbers of households simply cannot afford to pay."

Earlier this week, the Conservatives blamed prime minister Gordon Brown for allowing a "debt bubble" to develop within the British economy in recent years.