A third of UK mortgage borrowers are facing severe financial difficulties as the credit crunch bites harder into the housing market, according to a report released today.
The study complied by Mintel has found that nearly 1.5 million borrowers had been affected by the sub-prime crisis and had begun to fall behind on mortgage payments – in particular, so-called "unconventional" borrowers such as self employed people or the recently divorced.
The report is yet another gloomy prediction for the beleaguered UK property market and has further outlined the pressure on mortgage holders, 5.5 million of whom could soon be forking out increasingly stiff mortgage payments.
Toby Clark, Senior Finance Analyst at Mintel comments: “Sub-prime borrowers are only the tip of the iceberg. With lenders becoming increasingly cautious, many more mortgage-holders will be offered less than favourable terms when they come to remortgage. As many may not be able to absorb any increases in costs, we could see millions of people suffer.”
Furthermore, Mintel have predicted that the number of "non standard" mortgage holders is set to increase from 18 million to around 20 million if lenders insist on the tight lending criteria witnessed in recent months.
“Demand for non-standard mortgages will continue to grow as people’s financial circumstances become more complicated due to rising divorce rates and the growing popularity of self-employment. But, ironically, as lenders become increasingly cautious, non-standard mortgages will become harder to come by, leaving more adults without the finances to buy property," added Mr Clark.
A further report from MoneyExpert.com has also found that the number or uncapped upfront-fees has skyrocketed over the past year. According to the research, since November last year only 110 different mortgage products came with an uncapped application fee which was dependent on the amount borrowed. But in the past 12 months that figure has grown almost fivefold to 506.
Furthermore homeowners and first time buyers are being warned to expect highly inflated application fees for as long as uncertainty in the housing market remains. Sean Gardner, Chief Executive of MoneyExpert.com, comments: “The rate at which banks and building societies are increasing the cost of their fees or switching to uncapped fees is alarming. Borrowers need to look carefully at mortgage deals and not just focus on the interest rate. What might look like a good deal will soon become a bad deal once fees are taken into account.”
In addition, new research from Abbey has found that almost one-in-three homeowners would choose to fix the interest rate on their mortgage for five or more years if they had to renew their mortgage now, outstripping the demand for two year fixed rate mortgages which have been traditionally the favoured option.
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