The number of homes in the UK repossessed by lenders last year increased by 54% to 40,000, according to figures released by the Council of Mortgage Lenders (CML).

With cash-flow tight many small business owners have been forced to re-mortgage their homes to keep their business afloat.

The CML have urged any home owners who are struggling to maintain payments to contact their lender as early as possible to try and come to an arrangement that negates the need for repossession.

"We strongly urge borrowers to contact their lender and work with them before taking this step, as there may be other solutions," said the CML's director general, Michael Coogan.

The level of arrears among mortgage borrowers has also increased sharply. At the end of last year 1.57% (around 180,000) mortgages had arrears worth 2.5% or more of the outstanding balance owed to the lender, up from 1.08% of mortgages at the end of 2007.