press release

SWATHES of UK borrowers have put themselves at the mercy of their lender by overstretching themselves on their home loans, a major survey on the state of the nation’s mortgages by Moneynet.co.uk has revealed.

Well over a third - nearly 35 per cent - of respondents are juggling a mortgage debt more than three times their gross annual salary.

And even more worryingly, of these, nearly 30 per cent are unsure whether they would be able to provide proof of their income to a new lender – both factors which will seriously weaken their ability to secure affordable loans in the future.

“Many of these borrowers are likely to find it very difficult to remortgage now that the days of easy borrowing have come to an abrupt end,” says Moneynet.co.uk chief executive Richard Brown.

“Fewer and fewer lenders will be prepared to offer competitive alternative deals to anyone who is considered at risk of default. These borrowers will have little choice but to accept what their present lender is prepared to offer when their current deal comes to an end.”

There are going to be vast numbers of people finding themselves in this position in the near future – nearly half of those surveyed are on a fixed or discounted deal with 55 per cent of them due to hit the buffers this year or next when their deals expire.

“Of major concern is the fact that nearly 30 per cent of respondents have borrowed more than 80 per cent of their home’s value and nearly 15 per cent more than 90 per cent of the value. These borrowers are particularly vulnerable to falling house prices with the spectre of negative equity hanging over them. In fact, nearly 4 per cent are already in that position having borrowed more than 100 per cent of what their property is worth.”

Especially at risk of finding themselves left without an affordable replacement deal is the 17 per cent who have a history of adverse credit – possibly the most vulnerable group of people when it comes to remortgaging.

But most worrying is the number of people who expect to find themselves in difficulty over the next 12 months

“These figures shouldn’t be interpreted as scaremongering,” says Brown. “Nearly 10 per cent of respondents admitted that they reckon they are at risk of missing mortgage payments in the coming year, with a staggering 22 per cent prepared to consider using other means of credit to meet their mortgage repayments.”

The determination of UK borrowers to hang on to their hard-earned homes by using a credit card, loan or overdraft to stave off repossession is understandable but this strategy could lead many deeper and deeper into debt, warns Brown.

“Anyone finding themselves getting into problems with their mortgage payments or other debt are advised to seek help at an early stage. There are a number of organisations that can offer help such as Citizens Advice or The Consumer Credit Counselling Service,” he says. “The worst thing you can do is to bury your head in the sand – seek help and talk to your lender as soon as you feel yourself getting into difficulty."

* BBA/BSA data, April 2007