BANK of England figures show that the number of home- owners struggling to meet their mortgage repayments has risen for the fourth year running, as house prices continue to grow.
The Bank's Quarterly Bulletin said that borrowers, especially those on low incomes with high levels of debt, are falling behind. Rising utility bills, unemployment and unexpected shocks such as divorce were also blamed for giving 7.7 per cent of mortgage borrowers serious financial difficulties. The figures could prompt fears that UK households are becomingly increasingly overstretched as interest rate rises and higher utility bills begin to bite.
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The number of repossessions almost doubled last year, from 4,620 in the first half of 2005 to 8,140 over the first six months of this year, according to the Council of Mortgage Lenders. The Bank of England also expects that the number of bankruptcies could rise, as attitudes towards bankruptcy begin to relax.
The Bank said that the percentage of people who know someone who has declared bankruptcy has risen from 21 per cent to 24 per cent, and that people who know a bankrupt person are more likely to consider it themselves. But only 3 per cent of households reporting debt problems admitted to considering bankruptcy or an individual voluntary arrangement.
The report found that debtors in rented accommodation are more likely to have difficulty repaying unsecured debts on personal loans and credit cards than homeowners with mortgages.
The mortgage predictions came as the government reported that house price inflation is continuing to strengthen. The annual rate of growth went up in October, from 8 per cent to 8.6 per cent, said the Department for Communities and Local Government.
There was a slight dip in the average house price in October, down from £198,552 in September to £197,987, but analysts said this was seasonal.
Elsewhere in the Bank figures, of those with credit card and unsecured loan debt, most households owed less than £5,000. But 5 per cent admitted to owing more than £20,000.
Only 3 per cent of households identified as having debt payment problems said they were considering bankruptcy or individual voluntary arrangements (IVAs) as an option. But attitudes towards bankruptcy may change as they become more common, the Bank of England said.
It added: "Most of those who reported problems repaying their debts said that this was because of temporary cash-flow problems or because of overspending.
"Most expected to resolve their debt problems by cutting spending. Bankruptcy was seen as a last resort by most respondents."
FSA ENDOWMENT INTERVENTION
MORE than £120 million in additional compensation has been paid out to "unsuccessful" claimants over endowment policies after financial watchdogs intervened.
The Financial Services Authority said yesterday that since July 2005 more than 100,000 rejected mortgage endowment complaints had been reviewed or were currently being looked at. So far 75 per cent of decisions have gone in the consumers' favour, it said.
In a report released yesterday, the FSA said firms had increased the speed of their complaint-handling process and that the quality of decisions was improving.
From: Nick Bevens, Scotsman.com
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