Bank Mortgage Numbers are Misleading
Many analysts in the financial industry are upset at the way many debt management firms are using high interest, increased repossessions, and insolvency rates to sell financial products, sometimes to consumers who do not need them.
This trend is growing as fast as the debt management industry itself. This is causing many people to avoid buying their first-home, or extend the term of their home loan, to leverage more disposable income. In many cases, this is not necessary.
The CML states that only one per cent of mortgages are in arrears, a number that is well in line with long-term trends, and that the number of repossessions is still historically low.
The Royal Institute of Chartered Surveyors predicted that further trouble lies ahead.
“With the housing market slowing into 2008 and interest rates expected to hit six per cent, homeowners slipping behind with their repayments may be left stranded, unable to sell their way out of trouble,” commented Rics senior economist David Stubbs.
The CML state that they are refraining from further predictions regarding repossessions until more market data was available.
The fact that only one percent of homeowners are in arrears, and a much smaller percent are in trouble, indicates that much of the hype is geared around secondary industry agendas, and not the fear of an economic collapse, as some venues are predicting.
Even though homeowners are borrowing four to six times their income, they are also young, meaning that they will experience increases in their income generating skills, as well as in their wages. Many will see an increase within five years, relieving the burden of a 40 year mortgage for most of the loan term.