Experts believe that the gap between the rich and poor is set to widen in 2011 thanks to rising inflation and household living expenses. Recent figures have shown that both mortgage lending and lending on personal loans and credit cards increased in the early part of 2011.
Rise in borrowing on personal loans ‘concerning’
Experts are concerned that the rising cost of living coupled with wage freezes for many will leave households worse off. Families will then be forced to turn to unsecured debt such as personal loans and credit cards simply to pay for household expenses and to keep their heads above water.
Keith Iles, director for national IFA firm JHC Partnership, said: “It is frighteningly inevitable that in some areas people will struggle to pay for household expenses. This is such an expensive country to live in, and fuel prices are set to increase.”
Neil Warman, chief commercial and finance officer for mortgage specialist HML, agreed. He said : “It’s good to see a rising trend in the amount of money lent on mortgages – perhaps it is a sign that some confidence is returning to the housing market. But the increase in personal loans and overdrafts is concerning.”
Loans for remortgaging increased in February 2011
According to recent Bank of England figures, the number of loans approved for remortgaging in February increased to 35,725 from 33,972 in January, representing £4.7 billion. The Council of Mortgage Lenders (CML) believes that this is due to borrowers switching to better mortgage deals (such as fixed rate products) in anticipation of an interest rate rise.
However, the CML believes that 2011 will still be a ‘flat mortgage market’. In a statement, they said: “Our underlying view remains that 2011 is set to be a challenging year for households and the housing market.”
