6 November 2006
A third of mortgage borrowers are facing severe financial difficulties as a result of the credit crunch, according to a report published yesterday.
In the bleakest prediction yet about the effect of the lending squeeze on British homeowners, Mintel, the consumer research group, said that 5.5 million people would be hit by higher monthly outgoings from rises in the cost of mortgages.
A quarter of borrowers are already struggling with unmanageable debt, while 12 per cent have missed loan repayments in the past six months, according to a separate report by uSwitch, the price comparison website.
Mintel found that nearly 1.5 million borrowers had been dragged into the sub-prime trap after falling behind on monthly mortgage repayments. The report said that “unconventional” borrowers, including the self-employed or recently divorced, were the most likely victims of the mortgage cull because they posed more risk to lenders.
Toby Clark, senior finance analyst at Mintel, said: “Sub-prime borrowers are only the tip of the iceberg. With lenders becoming increasingly cautious, many more mortgage-holders will be offered less than favourable terms when they come to remortgage. As many may not be able to absorb any increases in costs, we could see millions of people suffer.”
The number of UK adults classified as “non-standard” by mortgage lenders could rise to 20 million from the present level of 18 million, if lenders continue to tighten their criteria, Mintel predicted. Mr Clark said: “Demand for non-standard mortgages will continue to grow as people’s financial circumstances become more complicated due to rising divorce rates and the growing popularity of self-employment.
“But, ironically, as lenders become increasingly cautious, non-standard mortgages will become harder to come by, leaving more adults without the finances to buy property.” |
