Fixed-rate remortgagors struggle but BoE optimistic

Latest figures from the Bank of England confirm fears that homeowners who have come to the end of their fixed-rate mortgage terms are finding it difficult to meet the higher repayments they now face.

In a survey of 2,000 people, the Bank found that 22% have been experiencing financial difficulties since their fixed-rate mortgages expired.

The figure compares with 6% for those on variable rate mortgages, who reported that higher interest rates were causing financial difficulties.

It is estimated that over a million fixed-rate mortgages will come to an end during 2008, but the Bank expects the majority of homeowners to manage any additional cost.

The survey found that just over half of all people with mortgages had a fixed-rate mortgage in the year to September 2007.

During the 12 month period, 16% of all mortgages were on a fixed-rate that had expired, and 79% of this group of homeowners saw their payments increase by an average of £59 a month, or around 12% of their monthly mortgage payments.

However, 25% found their repayments rising by more than 20%.

Overall, the Bank says its analysis is optimistic because only 8% of all mortgage holders reported that they were having problems with repayments, a figure half that seen in 1991, when a housing recession was at its height.

The Bank attributes this difference to a number of factors including: gradual rises in interest rates compared to the early 1990s; a strong economy and an increase in the amount of equity provided by home ownership.

The survey states that: “Relative to the early 1990s, mortgagors have deep wells of housing equity to draw on should they experience temporary problems servicing their debts.”

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