An increase in repossessed properties hitting the auction rooms in the coming months is being forecast as The Council of Mortgage Lenders predicts a total of 40,000 homes will be repossessed this year, up from 36,300 in 2010.

National lender Auction Finance Limited says the trend is leading to an increasing number of repossessed properties ending up in the auction room. It has lent more than £14m to buyers across 188 transactions in the year to date, a 34% increase on this time last year. The figure is forecast to exceed £20m by the end of the year.

Auction specialist The Essential Information Group (EIG), which provides details of every UK property that goes to auction, has reported that the number of lots sold May-July 2011 increased by 17% compared to the same period last year and the total raised increased by 12.3%.

Chris Baguley, director at national short term lender Auction Finance Limited, which provides funds for purchases before, during and after an auction, said:

“It’s likely that more repossessed properties will be sold in the auction room towards the end of the year and into 2012, particularly if interest rates creep up. Buy to let investors who do their research can find properties that achieve strong yields and make excellent long term investments.

“We’re experiencing an increase in demand for finance as investors snap up homes going under the hammer. With repossessions, lenders want to achieve a sale quickly, and therefore there are opportunities to buy properties at a low price.

“Before bidding at auction, always check the price properties in the area are going for and the rent achievable. Read the legal pack and remember that buying at auction is a binding commitment and carries the same legal implications as a signed contract.”

Auction Finance Limited typically lends 70 to 75 per cent on a property and loan sizes vary from £25,000 to £1m, with an average loan size of £74,500.