If you are a mortgage borrower, then as you are already well aware, "times they are a changing".
Now it is claimed that 1 in 3 of us with a mortgage could face financial hardship as the mortgage lenders raise their interest rates and tighten their criteria, thanks to the recent credit crunch that has started as result of the U.S. subprime crisis.
According to information from consumer research group Mintel, those with poor credit records are not the only ones at risk. Those who are self-employed or have moved house frequently are also in the firing line.
Basically that means that 5.5 million of the UK's 16.5 million borrowers could struggle to get a new mortgage or face higher repayments when their current deal comes to its end and they attempt to remortgage.
Mintel say that over 1.5 million of us here in the UK are considered sub-prime, and a further 4 million are seen by lenders as high risk because we have imperfect credit histories, are self-employed, do not have a regular income, have moved frequently or have fallen behind with our household bills.
Toby Clark of Mintel commented on their findings:
"The focus over the last few months has very much been on subprime borrowers, but they are only the tip of the iceberg." "In today's more conservative lending climate, the unconventional financial situation of these homeowners' means that they will now face higher repayments and increased lenders' fees when remortgaging or moving house" he added.
Mintel said demand for non-standard mortgages (
which is a £125 billion pound market) was set to grow as people's financial circumstances become more complicated due to rising divorce rates and the rising popularity of self-employment, but supply was unlikely to keep up.
Nearly 18 million people probably now qualified as non-standard consumers and that figure was set to rise to 20 million by 2012, Mintel said. But with lenders becoming more risk averse, and many tightening up their criteria to reduce the chance of bad debts, it said borrowers were likely to be offered "less than favourable terms" if they tried to switch to a new deal.
The problem will be exacerbated for those coming off 2 and 3 year fixed rate mortgages, as interest rates and mortgage arrangement fees have increased since they took out their loans.
The Council of Mortgage Lenders (CML), whose members accounted for 98% of all UK residential mortgages lending, said Mintel's figures were too high.
Based on a survey of almost 2,000 adults, Mintel said 20% of those who were interested in getting a mortgage in the future already foresaw some problems with their applications because of their income, working status or personal circumstances. That figure could grow in the years ahead if banks become more cautious in their lending.
To add further evidence of the credit crunch uSwitch suggested almost 1 in 4 people are already struggling with their debts, and feel their current level of borrowing is unmanageable or in danger of becoming so.
Their survey of more than 2,000 adults found out that in the last 6 months that:
- 12% had missed payments on debts and bills
- 10% had seen a direct debit or cheque bounced by their bank because they did not have sufficient money to cover it
- 20% of those questioned said they had "maxed out" at least one source of credit
- 9% said they may need to get further into debt just to fund their living costs
In addition, we have already written about some of you
using your credit card to pay your mortgage, which is a sure sign that you are being heavily affected by the credit crunch.
But just how much is the global finance crisis affecting you?
Are you worried that you are one of the 1 in 3?
Credit crunch; should you panic?