Prospects of More mortgage defaults

Recent evidence from the Council of mortgage lenders suggest that mortgage defaults in the UK have increased by 30% since this time last year. There have been 14,000 house repossessions in the first 6 months of the year. This is an average of 77 per day. The main reason for the growth in home repossessions is that the Bank of England has increased interest rates 5 times in the past twelve months. UK interest rates now stand at 5.75%. Interest rates are expected to rise even further by the end of the year.  See Will interest rates rise or fall in 2007-08

The rate of mortgage defaults is likely to speed up as fixed rate mortgage deals come to an end. People who took out fixed rate deals 2 or 3 years ago, will face a shock when they seek to re negotiate their mortgage deal.

A study by the National Housing association stated that they expect house prices to continue to rise over the next 5 years. This means first time buyers will only be able to get on the property ladder with great financial sacrifice or through the help of their parents. If first time buyers are stretched to get their first mortgage, this increases the prospect of future defaults.