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Mortgagors Risk Hardship

Written By On 20/05/2014

New data presented by the Resolution Foundation suggests that British property owners are about to face major affordability problems within the next few years.

Financial experts are predicting interest rates to hit three per cent by 2018, two and a half per cent up from the current low record rate.

The independent think-tank study expects around twenty five per cent of the UK’s eight and a half million home owners to struggle with repaying their monthly mortgage and home loans instalments.

The foundation's chief economist Matthew Whittaker advises borrowers to 'lock in' to existing lower rates on offer.

Mr Whittaker says:

There is still a window of opportunity to think creatively about the best way of reducing the risk to this vulnerable group while we still have ultra low interest rates, but that era is coming to an end relatively soon and the legacy of easy credit and the associated debt overhang will have to be reckoned with.

The analysis reveals that new stringent lending rules introduced by the FCA a few weeks ago is likely to keep mortgagors from switching to better deals. The controversial new Mortgage Market review will restrict people and may well tie them into unwanted loans with much higher rates.

It predicts borrowers without much equity within their properties or currently paying interest only, are likely to experience the more difficult hardships, as they will now find it much harder to remortgage.

According to the Bank of England, bank rates directly linked to home loans are now close to double the amount they were before the financial disaster. The Bank tells us the figure that currently stands at sixty five per cent, may well encounter even tougher times than the rest.