Debt delinquency

With the effects of the credit crunch still in our midst there is a likelihood of rising debt delinquency in the UK, both in mortgages and in personal debts.

The latest mortgage arrears data for the first half of 2008 has not recorded a marked increase yet, but evidence suggests that more homeowners have fallen behind with their payments since then.

Lower interest rates will help, but this is looking more and more unlikely at present due to rising inflationary pressures and it is more likely that rates will remain around the 5% mark for some time. It has been suggested that rates would need to hit 8.25% to replicate the debt crisis of the early 1990's.

When the Bank of England base rate was at 5.75%, the bank acknowledged that many households were pushed beyond their comfort zone. The current base rate of 5% is offering some relief, but some of those refinancing from cheap fixed rates that they had taken out 2 or 3 years ago may struggle with today's higher rates.

The number of repossessions are likely to rise in the second half of the year with some commentators believing they will rise sharply. However when looked at as a percentage of the number of mortgaged households in the UK, the figure for repossessions is quite small and far from the figures (guess work!) that the media report.

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