Mortgage holiday needed by more than 2 million Brits

19 December 2008 / by Rebecca Sargent
Two million Brits are considering taking a mortgage payment holiday as they struggle to cope financially, research from uSwitch.com has revealed.

And, according to the research, a mortgage payment holiday could push home owners' monthly repayments up by £53million and push the total interest they pay up by £7.2billion.

The news comes despite a recent promise by the Government to defer interest payments on mortgages for up to two years. As 729,054 people fear redundancy they are taking matters into their own hands by considering a mortgage payment holiday.

However, uSwitch.com warns that a twelve month payment holiday could put thousands of Brits into negative equity. Furthermore, 1.4 million consumers wrongly assume that interest will be frozen during the holiday, which is potentially putting them in a dangerous financial position.

In total, seven per cent of mortgage holders in the UK have already taken a mortgage payment holiday and a further two per cent are in the process of applying for one.

Commenting, Louise Bond, personal finance manager at uSwitch.com, said: "A holiday will not make the underlying financial issues disappear. In fact, both the repayments and the debt will actually go up after the holiday and, if anything, it could actually make the problem worse.

"These holidays are simply an agreed deferment but it is by no means a 'freebie' and the interest and the repayments still have to be made at some point."

Commenting on recent moves by lenders Nationwide Building Society and Halifax to protect consumers from pricey mortgage payment holidays, Ms Bond added:

"This is something every mortgage provider should now be addressing to ensure people do not end up in a worse financial situation after the holiday.

"With house prices expected to fall further in the next 12 months, this could just push homeowners over the edge into negative equity making it really difficult to remortgage."

© Fair Investment Company Ltd