According to recent reports the level of defaults on mortgages loans has increased during the first three months of this year, even though the base interest rate stands at just 0.5 percent, where it has been for the past two years. Since March 2008 the base interest rate has been at just 0.5 percent, with the decision to lower it in order to try and improve affordability, cut repossessions, and boost the economy.
Since then it has stayed at this low level, and for some homeowners this has seen significant amounts of money slashed from their monthly mortgage repayments. However, although repayments for many homeowners with variable rate mortgages have come down because of the lower interest rates the cost of living has soared and many have become used to using the spare cash to pay rising bills and additional debts that they have accrued since the interest rate fell.
When the base rate increases again, which it is expected to over the coming months, those that have found another essential use for the money that they saved on their repayments when they base rate fell will struggle to rise the money to meet increased repayments. This will lead to more and more people defaulting on their mortgage repayments unless they take action early on to ensure that they can cope with a rate rise.
If the level of defaults on mortgage repayments does rise it could mean a further increase in the number of repossessions in the UK, which became a huge issue after the onset of the global financial crisis and the recession. Banks are expecting default levels over the next three months to increase to their highest level in a year.
