Recently, the FSA launched a report suggesting upto a million homeowners could be at risk of repossession. They said the mortgages most at risk were mortgages which
- were more than 3.5 times income
- Mortgage over a longer period than 25 years
- Interest only mortgages.
- Mortgages more than 90% of LTV
On these criteria, I should start worrying as the first 3 apply to my own mortgage. My mortgage is currently 6 times income, 47 years and currently interest only. The only good thing is that my mortgages is 70% LTV.
To be honest, I’m not currently worried about my mortgage. The reason is.
I expect base rates to fall by at least 0.75% this year. True, it is possible banks may not pass the whole rate cuts on to consumers (I’m still waiting for the December cut) But, I expect at least part of the base rate cut will be past onto consumers.
Falling House prices isn’t really a problem. If I have to move I will get less for the house, but other houses will be comparatively cheaper to buy.
The FSA, said the real problem was when mortgage debt was combined with other types of debt like credit cards. There has been a trend to consumers taking on more debt and this means that debt repayments are taking a higher % of disposable income. True, interest rates may not rise this year, but who knows what will happen in the longterm.
There are also concerns for those who have to renegotiate a fixed rate mortgage when interest rates were lower 2 years ago. These homeowners will face a big increase in interest payments
The FSA also makes a point that many new homeowners are groups of people are not typical homebuyers, therefore it is hard to predict how they behave. I’m not sure quite what they mean by this. But, in the US, a high % of the missold subprime mortgages were concentrated amongst immigrants who are now struggling to meet mortgage payments.
The Charity Shelter, also say that they have had a record increase in the number of worried homeowners. In 2007, the charity was contacted by 80,000 borrowers about problems with their mortgages, compared with just 10,000 in 2006. Shelter go onto say, there are few mechanisms in place to help out those at risk of repossession.
I would be interested in hearing any experiences of our readers. Do you worry about meeting your mortgage payments? Do you think this year will make it more difficult to meet your mortgage payments?
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