Experts: Interest rate rise means more debt and homelessness
The Bank of England's Monetary Policy Committee today voted to raise the official base rate by 0.25 percentage points to 5.50%.
Initial reaction from two experts has shown some concerns over how the rise will effect homeowners facing high mortgage repayments.
James Falla, debt expert and MD of debt consultancy Thomas Charles, said: "Looking at a £150,000 interest only mortgage, this will mean an additional monthly payment of around £31.
"In itself, this does not sound much. However, this is the fourth rise since August 06, meaning an increase in just 9 months of around £125/mth. In real terms, an increase in the cost of mortgage borrowing of over 20% since last Summer.
"This is a significant increase in the cost of living for people with mortgages and can only be bad news for those who are already walking on the edge of a debt crisis. If every penny in the month is already accounted for, then having to find even an extra £30 per month is enough to push some over the edge.
"At Thomas Charles we are seeing more and more homeowners struggling with debt repayments. Incomes have not risen by 20% during the last year and so people are meeting the growing cost of their mortgage in other ways - all too often through the increased use of credit cards and loans.
"With people taking ever larger mortgages to get onto the property ladder, we expect this trend to continue and inevitably end in debt problems and insolvency for some people."
According to Shelter chief executive Adam Sampson, these debt problems could result in many people becoming homeless. He said: "This latest rate rise will push more and more hard working families with mortgages to the brink of repossession and homelessness.
"Thousands of families are already overstretching their finances to keep a roof over their heads, but this rate rise could be the final nail in the coffin for many borrowers hoping to keep their homes.
Mr Sampson added: "Last year alone around 123,000 homeowners in England faced the nightmare of court action by their mortgage lender, and already this year Shelter has given advice to nearly 1,000 people desperately trying to avoid repossession.
"The fact people are pushing their borrowing to the limit to get into an increasingly unaffordable housing market is a result of the failure to build enough homes to meet demand.
"The Government must take control of the situation by building more social rented and affordable homes while ensuring all mortgage companies lend responsibly and use repossession as a very last resort."
Source: 24dash.com
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