Brokers are being urged to protect borrowers against firms targeting homeowners threatened with repossession.
A swathe of companies, such as Repossession Angels, are offering to buy property at 20-25 per cent below market rate to avoid repossession and rent it back at market rate.
With repossessions rocketing by 65 per cent last year, some experts believe these schemes are suitable for those in need of a short-term fix.
But others fear that companies’ aggressive advertising could lure borrowers who are still able to negotiate with their lender or who are so indebted that they will see most of their sale money given to their lender and then default on their rent payments.
There are concerns that people will lose equity as the initial sale is well below market value. Many firms will negotiate a buyback after two years.
General insurance network Ceta has set up a similar operation and is offering a £400 sweetener for broker referrals.
John Charcol senior technical director Ray Boulger says: “The suitability depends on how close people are to repossession. It is important to explore how much people can get for the house on the market. What happens if the company goes bust?”