Nearly a Million Families Finding it Difficult to Pay Mortgages

Posted 2007-12-18

A survey conducted by the Bank of England reveals that nearly a million families are finding it difficult to pay their mortgages and yet another 1.8 million have stated that on more than one occasion have they faced such problems.

The situation does not seem as if it’s going to get any better with banks tightening their criteria for lending due to the global credit crisis. The last 12 months have seen an increase in the annual mortgage payments of homeowners by a total of almost 3.6 billion pounds, all this due to soaring interest rates.

Taking note of the situation, experts have predicted that this could lead to more households being pushed towards debt and insolvency rates would break records over the next two years. Also, the real estate market and the economy as a whole will not fair any better and will take a major down turn.

The Bank’s Quarterly Bulletin has published a poll that illustrates how many homes have cut down on expenses with some even having to borrow some more. About half the families that are faced with high interest rates were left with no option than to cut down their spending, whereas about ten percent have had to resort to borrow more and in some drastic circumstance to prolong their mortgages. An additional ten percent had no choice but to take up another job or put in extra hours at work. All this just to repay their mortgage.

What’s even worse is that this poll conducted by the bank was conducted in September when the global financial crisis was just in its initial stages. Since then, the situation has taken a turn for the worse. In addition, a number of homeowners are missing out, due to some lenders not passing on the quarter-point interest rate cut which the bank had announced earlier this month.

Also people who are renting are finding it more difficult to repay their debts than those who have mortgages, mainly because they generally have a lower income, reveals the survey.  Nearly 28 percent of renters have admitted to having problems to pay their debts on more than one occasion.

The  Confederation of British Industry’s chief economic adviser believes that though the slowdown seems striking in comparison to this year’s strong growth, the basic fundamentals of are economy are firm and the entire talk of recession is just blown out of proportion.

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