Mortgage Repayment Problems Signal Greater Problem

Posted 2007-12-18

Mortgage problems abound. A study completed by the Bank of England in September, 2007 found that nearly one million home-owning families were struggling to make their mortgage payments, and an additional 1.8 million stated they were struggling ‘at least occasionally.’ The situation for renters (who typically have lower incomes than homeowners) is even gloomier, with about 28% responding that they had trouble paying their debts ‘at least occasionally.’ With September merely the tip of the financial crisis iceberg, circumstances have become worse since the study took place.

Two factors leading to suffering amongst Britons include increasing interest rates for mortgages, which figures show have increased homeowners’ yearly mortgage payments by a total of £3.6 billion in the last year alone, and institutions tightening their lending practices, making receiving credit much more difficult.

Experts warn that this trend could result in an extremely higher rate of declared bankruptcy over the next two years, as well as a downturn in the property market and broader economy. Already, families are outwardly showing their struggle: In order to make their increasing mortgage payments, many report that they have reduced their spending; 10% have been forced to borrow more money or extend their mortgages; and another 10% have taken on a second job or decided to work overtime.

Despite the dramatic figures witnessed in recent studies, Chief economic adviser of The Confederation of British Industry said that the fundamentals of the economy remain sound and hype regarding a full-blown recession is exaggerated.

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