The number of home owners unable to keep up with their loan repayments is expected to rise, the Bank of England has warned.
It follows an “unexpected” rise in numbers since the beginning of the year, it reported on Thursday.
The Bank predicts the total number of mortgage defaults will rise during the next three months as fears intensify that the cost of living will remain high and interest rates will rise.
In its Credit Conditions Survey, it suggested that lenders were concerned about “the potential impact of increases in interest rates on default rates”.
Britain’s biggest mortgage lender, Halifax, yesterday took steps to guard against people defaulting on their home loans by announcing a clamp down on interest-only mortgages.
It now requires a deposit of 25 per cent for interest-only mortgages, up from 15 per cent.
|Payday Loans: Borrow up to £1000
Up to £1000 in 60 minutes at no extra
cost. All from the privacy of home
|Bad Credit Loans
Quick payday loans. Borrow up to £1000 online. Repay on your payday!
Melanie Bien, of mortgage brokers Private Finance, said: “By switching from repayment to interest-only, homeowners can significantly reduce their monthly costs which may make the difference between keeping the roof over their heads or falling into arrears and possibly losing their home to repossession. By severely restricting the availability of interest-only deals, lenders may be denying desperate homeowners a vital lifeline.”
It brings further misery to households as economists warned yesterday that house prices remain too high and have further to fall this year.
The average price of a home in Britain rose in March to £164,751, up 0.5 per cent on the previous month and up 0.1 per cent on a year ago, according to Nationwide.
Paul Diggle, a property economist at Capital Economics, said: “Although the extent of any further house price falls this year remains difficult to judge, the degree to which residential property is overvalued suggests that prices still have considerably further to fall overall.
“Not only is the market overvalued on most measures, but consumer confidence is low, public sector job cuts will see the labour market take a sharp turn for the worse later this year and mortgage lending is extremely subdued. In short, the fundamentals of the housing market still look very weak.”
Howard Archer, an economist at Global Insight, said: “It is clear that critical to the development of house prices over the coming months will be the amount of houses coming on to the market, mortgage availability, how well the economy and jobs hold up as the fiscal squeeze increasingly kicks in, and what happens with interest rates.”
Powered by Facebook Comments