December 29, 2013
More than a million homeowners will be at risk of defaulting on their mortgages and losing their properties in the wake of even a small rise in interest rates, a bombshell analysis reveals. Borrowers who have failed to pay down their mortgages when interest rates have been at record low levels now face being overwhelmed by “perilous levels of debt” when the inevitable hike comes.
Gillian Guy, chief executive of Citizens Advice, warned of a “financial ticking timebomb”: “The rising cost of energy, food and travel has been absorbing any spare income people may have. This means that in some cases there is little or nothing left to cope with larger mortgage repayments.”
According to a new report from an influential thinktank, the Resolution Foundation, even in the most optimistic scenario – in which interest rates rise slowly to 3% by 2018 and economic growth is strong and well-distributed between the rich and poor – 1.12 million homeowners will be spending more than half of their take-home pay on mortgage repayments – this is a widely accepted indicator of over-indebtedness.