Mortgage Payments a Challenge for One Million Families

Posted 2007-12-18

Nearly a million people are having problems making mortgage payments, and an additional 1.8 million say they have encountered difficulties on occasion, according to a Bank of England survey.

 

Experts expect banks will continue to tighten their lending standards in the face of the global financial crunch and many borrowers’ situation will grow worse.  In the last twelve months, homeowners have seen mortgage payments increase by £3.6 billion as interest rates ballooned. 

 

The Quarterly Bulletin, published by the Bank of England, reports that many people are being forced to cut expenditures and borrow additional funds.  Nearly 50 percent of those with higher interest rates will reduce spending while 10 percent have extended their mortgages or borrowed an additional sum.  To make their monthly mortgage payment, another 10 percent are working longer hours, either at a second job or overtime. 

 

The Bank conducted its survey in September, in the early stages of the financial crisis.  The situation has worsened since then.  Although the Bank announced a quarter-point interest rate reduction earlier this month, many lenders are failing to pass that savings on to their customers.

 

Renters, who typically have lower incomes than homeowners, are finding it even more difficult to repay their debts, according to the survey.  Twenty-eight percent of renters reported problems making payments “at least occasionally.”

 

The chief economic advisor for the Confederation of British Industry insisted that the nation’s economic fundamentals remain sound and that fears of a recession are exaggerated.  He suggested that the current slowdown appears more dramatic in the face of last year’s strong growth.

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