British mortgage repossessions hit their lowest since 2007 last year but are expected to rise in 2012 due to increasing unemployment, the Council of Mortgage Lenders said on Thursday.

The CML said the number of home repossessions came in at 8,500 between October and December, down from 9,300 in the previous three-month period, but up from 8,100 at the end of 2010.

In 2011, repossessions totalled 36,200, the lowest since the start of the financial crisis.

The number of people who fell behind with their mortgages also fell last year, the CML said.

However, worsening unemployment and continuing pressures on the cost of living were likely to result in more arrears and repossessions this year, the CML said.

It reckons there will be around 45,000 repossessions and around 180,000 mortgages in arrears of 2.5 percent or more by the end of the year.

In the face of wider economic difficulties and rising unemployment, we are concerned that there will be a higher number of people facing more serious problems in 2012, said CML Director General Paul Smee.

Separately, the Ministry of Justice said that courts in England Wales issued 13,607 mortgage repossession orders in the fourth quarter of 2011, down from 13,908 in the third quarter.

Record low interest rates and relatively low unemployment to date have shielded homeowners from the economic downturn, but the ongoing euro zone crisis and the failure of the economy to pick up steam could lead to higher unemployment as the year progresses.

(Reporting by David Milliken and Fiona Shaikh)