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Many mortgage-payers living in ‘false sense of security’

Money Advice Trust comments on ONS Burden of Financial and Property Debt report showing total household property debt hit £1 trillion in 2010-2012

The Office for National Statistics (ONS) today published its new report on the burden of financial and property debt in Great Britain 2010-12.  The report shows that households continue to feel less burdened by their mortgage repayments.

According to the biannual report, the number of households who considered their property debts a ‘heavy burden’ fell from 11.3 percent in 2008-10 to 10.6 percent in 2010-12.  This continues a downward trend since the financial crisis as interest rates fell to and then remained at their record low of 0.5 percent.

The report also shows that 42.1 percent of households in the poorest tenth of households say they feel their property debts are a ‘heavy burden’, compared to just 2.4 percent in the richest tenth.

Total household property debt was estimated to be £1 trillion in 2010-2012, up from £980 billion in 2008-2010.

Joanna Elson OBE, chief executive of the Money Advice Trust, the charity that runs National Debtline, commented:

“There is a real risk that after more than six years of record low interest rates, many mortgage-payers are still living in a false sense of security.  The reality is that they may have a very short window in which to prepare for coming hikes in interest rates.

“Just last week, the Governor of the Bank of England placed interest rate rises firmly on the horizon, with commentators expecting a rise as early as the New Year.  Households urgently need to conduct a financial healthcheck to make sure they will be able to cope with higher costs – be they higher mortgage payments or higher interest payments on outstanding balances on credit cards and personal loans.

“We should be particularly concerned about younger homeowners, many of whom have never experienced a rate rise, as well as mortgage payers who are currently out of work or on income-related benefits.

“In particular, 183,000 households currently receive payments under the Support for Mortgage Interest scheme.  With the amount payable having just been reduced and the announcement in the Budget that these payments could be converted from a benefit into a loan, many of these households face an uncertain future.

“Furthermore, while this ONS report looks at mortgages alone, we must not forget there are a growing number of people struggling with another kind of property debt – private rent arrears.  They too will be affected by higher interest rates through rising rents as extra mortgage costs are passed on by landlords.”

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