Nearly 200,000 families at risk of losing their homes after falling behind with mortgage repayments
- The country’s 11.2million households with a mortgage have become used to rock-bottom mortgage repayments
- And many are not braced for the ‘payment shock’ when they inevitably rise
- Figures show a total of 195,900 mortgages are currently in arrears, which means the homeowner owes at least three months’ of monthly repayments
- Of that number, 42,500 have a serious problem, owing more than one year’s worth of monthly mortgage repayments
Around 200,000 families in Britain are at risk of losing their homes after falling up to 12 months’ behind with their mortgage repayments, the Council of Mortgage Lenders said yesterday.
The warning comes after the Bank of England governor said he would be ‘absolutely’ prepared to raise interest rates before the next election in May 2015.
The country’s 11.2million households with a mortgage have become used to rock-bottom mortgage repayments – and many are not braced for the ‘payment shock’ when they inevitably rise.
Interest going up: City analysts predict interest rates could rise at the end of next year or in 2015, rather than in late 2016 as the Bank had previously
The Bank cut the base rate to 0.5 per cent, the lowest level in history in March 2009, which means mortgage repayments have been extremely low for four and a half years.
But the base rate will not be kept so artificially low forever.
City analysts predict it could rise at the end of next year or in 2015, rather than in late 2016 as the Bank had indicated only three months ago.
Paul Smee, director general of the CML, urged homeowners to plan ahead and accept their mortgage costs will rise, rather than burying their heads in the sand about how they will find the extra money.
He said: ‘It makes sense for people to think ahead now to how they will manage their finances to cope with higher interest rates and higher mortgage payments, as and when rates rise in the future.’
In debt: Figures show that a total of 195,900 mortgages are currently in arrears and of that number 42,500 have a serious debt problem
The CML’s figures, published yesterday, show a total of 195,900 mortgages are currently in arrears, which means the homeowner owes at least three months’ of monthly repayments.
Of the total number, 42,500 have a serious problem, owing more than one year’s worth of monthly mortgage repayments.
But this is despite the fact that mortgage repayments have never been cheaper for millions of families.
For example, the average two-year fixed rate mortgage for people borrowing 75 per cent or less of the property’s value currently charges a rate of 2.46 per cent.
For a family with a £150,000 25-year loan, this currently costs £670 per month.
In February 2009 – the month before rates were cut – the average interest rate charged on this type of mortgage deal was 4.35 per cent.
This would have meant monthly repayments of £821, which means the family is currently saving £151 a month on their repayments from the lower interest charge.
Experts say people have got used to their lower monthly repayments and also used to spending the money that has been saved from their cheaper mortgage on other things.
Matthew Pointon, property economist at the consultancy Capital Economics, said: ‘Household finances are still vulnerable to potential shocks.
‘The real test will come when interest rates do eventually rise. That will put already stretched household budgets under more strain.’ In theory, families should be able to afford the higher costs.
Banks are meant to ‘stress test’ all mortgages before they hand out the loan to make sure they can afford a higher interest rate of between six and seven per cent.
The number of people losing their home remains extremely low, with just 7,200 families losing their home between July and September, the lowest-ever quarterly total.
Most watched News videos
- Amber Sherlock makes Julie Snook change before TV appearance
- Paranormal activity? Young girl spooked by 'ghost' in her room
- Biden becomes emotional when awarded Medal of Freedom by Obama
- Female bullfighter is mounted by young bull
- She's falling for him? Girl gets 'pushed off ledge in prank' video
- Passenger is filmed slapping a member of staff at Stansted Airport
- Amber Valletta makes a rare appearance at LAX with son
- 'My Michelle': Stevie Wonder pays tribute to Michelle Obama
- Twin sisters separated at birth reunited live on GMA
- Sheep attack shepherd after being frightened by a car in Germany
- Angry passenger films family being kicked off Jetstar flight
- Welsh boxer overreacts as tied up lion makes slight movement
The comments below have not been moderated.
The views expressed in the contents above are those of our users and do not necessarily reflect the views of MailOnline.
We are no longer accepting comments on this article.