Credit crisis and mortgage strife hits middle income families hard

07 April 2008 / by Rachael Stiles
Middle income families are finding themselves struggling as a result of the credit crisis, new research from AXA has revealed.

The study found 72 per cent of households with a total income of £30,000 or more will be attempting to cut their spending as a result of the credit crisis.

Over the past few months the cost of living has soared as financial turmoil has hit the UK and pushed mortgage rates and fuel bills through the roof.

According to AXA, inflation on products and services typically used by middle income families has hit a high of 5.7 per cent.

Some 15 per cent of households questioned said they have found themselves so strapped for cash that they have been forced to get a second job or send a non-working member of the household out to work. Worryingly, the survey showed that as many as one in five high earners are reducing their savings and pension investments, 30 per cent of whom said they just do not have the money left at the end of the month to save for the future.

AXA spokesperson, Steve Folkard said: “It’s no wonder that households with above average incomes are struggling to cope. A typical family in middle Britain may have a higher than average income but millions are weighed down by high lifestyle costs and face tough choices as the strain on their finances takes its toll.

“If we don’t tackle this issue this group are in for a wake-up call in retirement. A significant proportion of people who enjoy high incomes now, may well find that things are a lot tougher later in life. Planning for the financial future and particularly retirement is more than simply deciding what you want to do. It is also about making sure you will have enough money to accomplish these goals – unless this group takes action now they might find they will struggle to maintain their lifestyle once it’s too late.” Mr. Folkard concluded.

The research comes in days of financial doom and gloom, as many homeowners come to the end of their fixed rate mortgages and lenders become more reluctant to offer credit. Ironically, house prices are falling, but so is the availability of mortgages.

Mortgage rates are being pushed to new highs as interbank lending rates rise to as much as 0.75 per cent above the Bank Rate and middle income re-mortgagers are finding themselves even more out of pocket. Katie Tucker from mortgage experts John charcol said:

“Because the synchronisation of exceptionally low two-year-old deals of around 4.29 per cent are now reverting to unnaturally high standard variable rates of around 7.25 per cent, re-mortgagers are also scrambling to arrange affordable rates, and lenders have had to pull their best deals off the shelves, just to catch their breath.”

© Fair Investment Company Ltd