Category: Mortgage

As many as 320,000 UK adults have been pushed into poverty by soaring mortgage costs after the sharpest increase in interest rates since the 1980s, a leading thinktank has said.

Highlighting the damage caused by Britain’s exploding mortgage timebomb, the Institute for Fiscal Studies (IFS) said individuals who needed to renew their home loans or take out new ones in the past two years had experienced a sharp fall in their disposable income.

It said some households were paying thousands of pounds more in additional mortgage payments, in a development that was likely to have driven up poverty rates among mortgagors by 1.4 percentage points between December 2021 and December 2023.

It said this jump in relative poverty – defined as people living in households with income below 60% of the median – was the equivalent of 320,000 more adults falling below the breadline.

Millions of homeowners have faced a leap in borrowing costs after 14 consecutive increases in the Bank of England base rate from a record low of 0.1% in December 2021 to 5.25%, where it sits now, in its most aggressive assault on inflation for four decades.

The number of Britons “going bust” is up by a third on the same month last year against the background of mortgage hikes and the cost of living crisis.

Personal insolvencies in June were 10,395, which was up by 10.3 percent on May and by 32.9 percent on the same month last year.

High interest rates, which have pushed up the cost of mortgage repayments, and the fact more people are relying on credit cards to cover essentials, are seen as factors behind the increase.

The main driver of the increase in personal insolvencies is a rise in Debt Relief Order (DRO) numbers, which hit their highest level since January 2021 following the removal of the fee to apply. There has also been a rise in IVAs – Individual Voluntary Arrangements.

A DRO is an option for people in debt where they owe less than £50,000, do not own their own house, do not have any assets of value and not much spare income.

Individuals need to speak to a special DRO adviser, who will provide help to make an application to the official receiver.

HOMEBUYERS pressurised into using estate agents’ mortgage services face being “ripped off”, warn experts as cases of conditional selling rise.

Conditional selling, banned under industry regulations, happens when estate agents try to strong-arm or incentivise buyers to use their mortgage broker.

Buyers who refuse are told it could affect their chances of securing the property.

It’s an underhanded practice that has been around for a long time say brokers. But recently it has become more widespread.

If persuaded, buyers could wind up paying too much for their mortgage, for the property and for extra services such as insurance and legal work.

Sun Money explains how to spot signs of pressure selling and what you can do to avoid it.