Home repossessions to rise
More people could have their home repossessed this year due to widely anticipated increases in interest rates. This stark warning has been issued by the Royal Institution of Chartered Surveyors (RICS).
RICS points out that mortgage repayments now account for a larger part of after-tax income than at any time since 1991. The average two-person household on typical earnings now pays out 22% of their post-tax earnings in their mortgage.
That figure is set to increase for many, as at least one and perhaps two interest rate rises this year feed through to higher mortgage rates.Over the last decade, property prices have boomed in the UK, with some areas seeing price inflation of almost 300%. As a result, borrowers have taken out bigger and bigger mortgages, which they have been able to afford as we have enjoyed relatively low interest rates. Repossession levels have remained very low, although they did increase in 2006 for the first time this century.
Higher interest rates could result in more people finding their mortgage payments unmanageable, and, ultimately, higher repossession figures.
“Affordability conditions will also continue to worsen with the Monetary Policy Committee expected to raise interest rates in February,” RICS senior economist David Stubbs warned.