New figures indicate rising interest rates are beginning to bite after the number of people whose homes were repossessed surged by a third during the first half of the year.

The Council of Mortgage Lenders said 14,000 homes in the UK were repossessed during the six months to the end of June, a rise of 18% on the previous six months, and 30% above the same period of 2006.

The surge in the number of homes seized is being blamed on the recent rise in levels of lending to borrowers with a poor credit history in the sub-prime sector.

The CML is warning that the increased risks around lending to people by-passed by traditional lenders means arrears are more likely to translate into repossessions, and this is likely to happen at an earlier stage.

But despite the gloomy figures, the group claims the number of repossessions is still low by historical standards.

The CML also said 125,100 homeowners had mortgage arrears of three months or more, 4% higher than during the six months to the end of December, but 3% lower than for the first half of 2006.

The figures come as the Government's Insolvency Service revealed an unexpected fall in the number of people becoming insolvent during the second quarter of the year.

Statistics show 26,956 people in England and Wales were declared bankrupt or took out an Individual Voluntary Arrangement during the three months to the end of June - an 8% drop on the previous three months.

In total, some 16,258 people were declared bankrupt during the three months to the end of June, 3% less than in the previous quarter, while 10,698 took out IVAs, 15% fewer than during the first three months of 2007.

Analysts had anticipated there would be a fall in IVAs, as creditors have become increasingly dissatisfied with the arrangements, but the fall in bankruptcies took most people by surprise.

But experts claim the consumer spending boom and expectations of a further rise in interest rates mean bankruptcies have not yet reached their peak.

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