Over one million could lose their homes in next 18 months
February 11, 2008
Officials from the Financial Services Authority, the UK’s financial regulator, have warned that over the next 18 months over one million homeowners in the UK could end up losing their homes.
Officials stated that the effects of the credit crunch combined with a range of other financial factors such as rising living costs and tighter lending conditions could result in a mass loss of home over the 18 month period, with some household already teetering on the financial edge.
In fact the regulator has stated that of those homeowner that took out a mortgage between April 2005 and September 2007 around 25% are in danger of losing their homes through repossession. This includes homeowners that took out a home loan during this period and those that remortgaged to another deal. The FSA has come up with a list of three high risk factors, and those at risk of losing their homes have two or more of these risk factors.
Included in the risk factors put forward by the FSA are putting down a deposit of lower than 10% on the home, borrowing more than 3.5 times the salary of the borrower, and taking on a mortgage for longer than the traditional 25 year term. Around 150,000 have all three of these risk factors, and this is causing concern for the FSA.
One FSA official said: ‘We are not saying this scenario will definitely happen but we want to raise awareness of the risks. With continuing uncertainty over the economy, it is more important than ever for people to take care of their finances. Anyone with debts, including mortgages, should take stock, review their budget and make sure that it is affordable if there is change in circumstances, such as a job loss or a rise in interest rates.’
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