A leading debt charity has warned that the number of homeowners struggling to pay their
mortgages is expected to rise this year, particularly if the Bank of England raises interest rates to
combat spiralling inflation.
The Consumer Credit Counselling Service (CCCS) has warned that financial pressures such as salary
freezes and high inflation and wage freezes are restricting the ability of many British borrowers to
pay their mortgages.
Homeowners struggling under over £30,000 of unsecured debt
The CCCs counselled 90,000 homeowners in 2010 who owe an average of £30,160 in unsecured debt
on top of their mortgage. Whilst the numbers of people calling the charity’s mortgage centre fell
significantly in 2010, the CCCS expect this to reverse once interest rates start to rise.
Delroy Corinaldi, CCCS External Affairs Director, says: “So many households are just managing to
make ends meet, that even a small increase in the cost of their mortgage may push them over the
edge. As far as possible, families need to think how they could pay such increases and seek help at
the earliest opportunity if they feel that they cannot cope.”
Homeowners would struggle to repay mortgages if rates rise
A recent CCCS survey designed to investigate the effects of an interest rate rise found that a two per
cent increase in mortgage rates will lead to a £307 rise in monthly mortgage payments by its clients
across the UK.
The CCCS say that the average mortgage payments of their clients is currently £561.61, meaning that
a £307 rise (55 per cent) would leave homeowners paying an additional £3,700 more in mortgage
payments every year.
CCCS is also concerned that households struggling under the weight of their debt are using credit
cards to pay their mortgages. Any interest rate rises would therefore have an immediate and
potentially catastrophic effect on people’s ability to maintain the payments on their home loan.
