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Rate Increases Could Result in 3m Home Difficulties

[ Posted November 1st, 2010 ]

According to recent figures released by the Council of Mortgage Lenders (CML) a rise in the mortgage interest rates could result in substantial widespread financial difficulties for many families, with a little as a 2% increase resulting in roughly 2.9 million mortgages currently being offered no longer being affordable. This is especially true in today’s market where the combination of increased taxes, job instability (especially in the public sectors) and higher than expected inflation are all playing their role to make troubles for many people. At the same time inflation itself is seen as one of the key factors behind the worries as increased inflation must be met with increased interest rates in order to combat it, making this a vicious cycle for many current and prospective home owners alike.

To complicate matters a combination of falling house prices along with increasing difficult mortgage regulations has caused homeowners that are currently holding a mortgage to be unable to remortgage elsewhere for better deals. This means that in most cases they are stuck with whatever offer they were able to obtain in the past and cannot take full advantage of any new offers such as locking in an affordable fixed-rate deal in order to keep their monthly interest rate low.

Both the Financial Services Authority (FSA) and CML warn many home owners to be on the lookout for any substantial changes underway in the coming months that could drastically affect a household’s liquidity. This is especially true in light of the FSA announcing that roughly 45% of all mortgages were done so without lending institutions verifying a recipient’s income first, potentially causing large pockets of financial instability in the roughly 5.4 million home loan holders that have not had their own personal income verified for mortgage viability.

 
 
 
 
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