UK Mortgage Defaults Increase

The number of defaults on UK mortgages has more than doubled in the past year to 77,000 households.

Part of the problem is that housing costs have been taking a bigger % of people’s disposable income in the past few years. According to the consumer credit counselling service housing costs have risen from 33% of disposable income to 44%.

Why Mortgage Defaults has increased

• higher house prices (house prices have trebled in the past 10 years
• Increasing Council Tax
• 5 increases in interest rates in the past year. For example, someone with a £100,000 mortgage will be paying an extra £80 a month since last August. Many homeowners on fixed rate mortgages are soon to be facing a sharp increase in mortgage costs because their fixed rate period comes to an end.
• Higher levels of other debt such as credit card debt.
• More than 50% of economists interviewed by Reuters predict interest rates will continue to rise to at least 6%
• The % of households taking out a mortgage of 95% present value has doubled to 19% in the past  year.

This increase in mortgage defaults is likely to cause a rise in the UK sub prime market, even though their are concerns the UK housing market could be mirroring the US housing market.

related

• Adverse Credit Mortgages 

• Dangers of Sub prime mortgages