Britain is suffering from “a considerable rise in repossessions” if the economy slows, as per the ratings agency Standard & Poor’s, as almost 1 in 5 problem mortgages are “severe” cases that show some sign of improvement.
The amount of households that have reduced so far behind on their repayments they are considered “strict” is now 20 % of all problem mortgages – double the level of two years ago.
S&P credit analyst Mark Boyce said. “This strict payments overhang is, a troubling sign, in our view and suggest that further economic strain could well lead to a significant augment in repossessions in the medium term.
Households are facing complexity despite the Bank of England’s record low rate of interest 0.5 %. Around 2-3rds of households are at present on unpredictable rates to take benefit of the cheap credit as compared to around half during a more characteristic year.
‘Cure rate’ for UK non-conforming borrowers have seen “Record low interest rates” in milder arrears increase as they receive their mortgage payments back on track,” S&P said in its report into non-conforming residential mortgage-backed securities. “However, there is a large core of borrowers who stay in harsh arrears, despite lower scheduled payments.”
Low rates of interest have assisted “cure” more than half of the “mild” arrears cases but just 40 % of “severe” cases, defined as those which are over 3 months behind on payments.
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