Rise in default levels expected over first quarter of year
October 6, 2008
Industry experts have predicted that the level of mortgage defaults over the first quarter of this year is likely to rise in the light of various factors that are affecting affordability for homeowners when it comes to mortgage repayments. Figures released by the Bank of England show that the level of defaults is set to go up, and the effects of the credit crunch are going to continue to affect affordability over the course of the year. Amongst the factors that are likely to affect affordability for homeowners are high interest rates and repayments, increased energy costs, higher petrol and food costs, and difficulties in getting affordable finance from lenders.
The credit crunch has been sweeping across the UK since the summer of last year, after making its way across the Atlantic, where it was sparked in the sub-prime sector of the mortgage market in the United States. Consumers have been finding it increasingly difficult to get affordable finance in all areas of the finance industry, with lenders in all sectors tightening their belts when it comes to lending due to fears over defaults and bad debts, coupled with higher inter-bank lending fees.
Officials state that fewer and fewer lenders are willing to take risks when it comes to lending money in both the private and industry sectors, and this has made it difficult for consumers to get an affordable deal when it comes to mortgages.
In addition to this many people are set to come off cheap fixed rate mortgages that were taken out two or three years ago over the coming months, and will see their interest rates and repayments shoot up, which could add to the number of mortgage defaulters over the next few months.
Following the Bank of England figures many experts had predicted that there would be another interest rate cut following the January MPC meeting. However, it was decided that the base rate would be kept on hold at 5.5%.
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