"The data indicate that government initiatives to reduce repossessions by requiring lenders and borrowers to examine all alternatives is having a significant beneficial impact," said Howard Archer at Global Insight.

"Home repossessions now look like being much less than feared."

CML figures showed the number of homes repossessed by lenders nudged up to 11,700 in the three months to September, a rise of three percent compared with the second quarter and five percent compared with the same period a year ago.

However, there was a fall in the number of people who fell behind with their mortgage repayments, suggesting conditions have started to stabilise.

The number of loans in arrears by 2.5 percent or more of the outstanding mortgage balance totalled 194,600 in the third quarter - 1.77 percent of the total - down from 204,200 at the end of June.

Separate figures from the Ministry of Justice showed courts in England and Wales issued 35 percent fewer mortgage possession orders in the third quarter of this year compared with a year ago, and company winding-up petitions were down 3 percent. (C ) Reuters