Homeowners warned about high debts

8 March 2007

A leading charity has warned that homeowners will face a tough time in 2007 dealing with high levels of personal debt. The Consumer Credit Counselling Service (CCCS) said that higher inflation and interest rates could leave mortgage-holders with less cash to pay their debts.

The CCCS estimates that repayments on a £150,000 mortgage will already have risen by £500 a year as a result of the three interest rate rises since last summer. This month, the Bank of England left rates unchanged at 5.25%, but many analysts predict that the Bank will raise rates soon – probably by early summer.

A spokesman for the charity said it was seeing more homeowners with debt problems. Its chairman, Malcolm Hurlston, said people were being squeezed by higher interest rates – and matters were being made worse by changes in the mortgage market. The high fees imposed by mortgage lenders make it increasingly difficult for homeowners to fix their mortgage rate, which can help people to budget more effectively.

And the charity said many first-time buyers had borrowed huge sums to get onto the property ladder – and could find it hard to make ends meet in 2007.

CCCS chairman Malcolm Hurlston said: “As the burdens on household finances mount, our research shows that homeowners in particular should take care. It is no longer clear that getting a foot on the mortgage ladder is a sensible step. The rungs are wobbling.”