Gloomy outlook for debtors

| August 28, 2007 | 0 Comments

The current lack of money in the debt markets is likely to cause a sudden increase in the amount of people in the UK who are denied mortgages, loans and credits. The shortage of money is caused by the crisis in the US sub-prime mortgage market.

Last year, 7 million UK consumers were denied credit and this figure is expected to reach 8.6 million in the next 4 years according to experts. The crisis could mean that it will increase even further, as banks around the world take up the losses incurred by the crisis, which have been estimated at £50 billion.

Pressures from the Financial Services Authority, together with the crisis in the US have resulted in UK lenders reviewing their practices to screen out those with a poor credit rating.

Several lenders have already withdrawn their sub-prime mortgage products, as well as mortgages where the applicant’s income is self-certified. Some lenders have increased the interest rates charged on these loans by as much as 2.5%, adding £150 a month to repayments on a £100,000 mortgage.

A vast amount of people in the UK are struggling with their finances following the 5 increases in the Bank of England base rate in the past year.

Finally, County Court judgements are rising, along with home repossessions, adding to the number of people with poor credit histories.

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