Homeowners struggled with mortgages in October
December 31, 2007
According to a recent report from the Council of Mortgage Lenders homeowners faced increasing repayment difficulties in the month of October, with high interest rates and property prices contributing to the financial difficulties faced by homeowners in the UK. According to the report first time buyers had to spend around 20.6% of their monthly income on interest repayments compared to 20.4% in September. October’s figure was the highest since 1991 according to the report.
The Bank of England brought the base rate down by a quarter point last week to 5.5%, and it is thought that many homeowner may find that there financial situation eases because of this drop in the base rate, as this will bring down their mortgage interest rate and also their monthly repayments. However, there are still concerns about the many homeowners that are due to come off cheap fixed rate deals over the coming months, as they could still face a hefty rise in repayments even with the quarter point interest rate cut.
The expected rise in repossessions in the UK as a result of this has spurred conservative leader David Cameron into taking action. He has been urging lenders to be more lenient with borrowers that fall behind with mortgage repayments and get into arrears. He has also asked lenders to start planning in advance for the many homeowners that are likely to struggle with repayments when their fixed rate deals end.
Michael Coogan from the Council of Mortgage Lenders stated that borrowers that were struggling with increased repayments needed to contact their lenders right away, but added: “For those customers coming to the end of their fixed rate mortgage in 2008, the potential impact of higher monthly payments will be diminished by the fall in bank rate this month and other rate reductions to come early in the New Year.”
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