Increase in repossessions due to interest rate rises
August 27, 2007
For some months analysts and economists have been predicting that the series of interest rates rises that have been applied by the Bank of England over the past year will tip many households over the edge financially, leaving many struggling to repay their mortgages as a result of being unable to keep up with repayments.
After the fifth interest rate rise of 0.25% in the space of a year, which was applied in July, predictions grew stronger, and recent reports indicate that interest rate rises are indeed starting to take their toll on homeowners.
The five interest rate hikes of 0.25% each over the past year have seen the base rate rise from 4.5% to 5.75%, and mortgage repayments go through the roof in some cases. Further affecting the issue is the number of homeowners now coming off low fixed rate mortgage deals that were taken out in 2005, and seeing their interest rate shoot up to today’s base rate, with repayment levels to match.
In the fist half of this year the number of repossession hit an eight year high, with around 77 repossession per day taking place. With interest rates at their highest in six year, many homeowners are struggling with their repayments, and worse still experts are warning that in order to bring inflation back under control there will have to be a further rise in interest rates this year, which would take the base rate to at least 6%.
One industry professional stated: “With the housing market slowing into 2008 and interest rates expected to hit 6 percent, homeowners slipping behind with their repayments may be left stranded, unable to sell their way out of trouble.”
Alan Wright
27th August 2007
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