Buy-to-let
Some 60 per cent of mortgage holders anticipate that they will be in the same financial position or better in three years’ time – even though the majority expect interest rates to rise, according to the Council of Mortgage Lenders (CML).
The figures, published today in CML News & Views, show around half expect their finances to be broadly unchanged, with more than 10 per cent predicting their financial position will improve.
Almost one-third expect their finances to worsen as rates rise. One-fifth say they are currently experiencing some financial difficulty, but fewer than half this amount believe themselves to be in danger of missing a mortgage payment.
However across the market mortgage arrears are continuing to decline, and CML data shows there are currently only 1.18 per cent of loans with arrears amounting to 2.5 per cent of the outstanding balance.
The data also sheds light on likely triggers of mortgage payment difficulties, many of which are not simply related to the loan commitment itself.
Factors most commonly cited as affecting future mortgage affordability included the higher cost of living (61 per cent), minimal savings (41 per cent), low or falling income (36 per cent), other debts (30 per cent) and ill-health (17 per cent).
Borrowers have a range of “coping strategies,” or actions they are prepared to take to ensure that their mortgage remains affordable. Almost 40 per cent say they’d cut back on non-essentials but other options include cancelling major spending plans, remortgaging to a cheaper deal or working more hours.
The CML concludes that households appear to have a good understanding of what’s ahead and are realistic about how they will cope.
“Those who expect their situation to get worse and to be in some degree of difficulty over the next few years are willing to take more action and consider a broader range of actions. They are generally open to trying a combination of coping strategies, rather than just opt for one.”
