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February 2008
Many Mortgages At Risk

The Financial Services Authority (FSA) has reported that more than one million mortgages are a "cause for concern"

In its latest report, they say that nearly a third of new mortgages approved between 2005 and 2007 contained a higher element of risk:

  1. higher than usual loan to income multiples
  2. extreme loan to value ratios and terms
  3. exceeding the typical 25 year period

Which in turn could lead to a growing number of consumers experiencing debt repayment problems in 2008. It is not necessarily the ability to repay the mortgage that causes problems but the other debts they accumulate and many people are struggling to meet their borrowings.

There is also the risk of the return of negative equity which has not been seen for 15 years. It is believed that consumers are ill prepared in the event that their debt exceeds the value of their property and have placed too much dependence on their ability to obtain cheap credit and housing wealth to sustain their consumption.

It is estimated that 1.4 million people are due to come off short-term fixed rate mortgages and are likely to face a £210 a month rise in repayments if they move to a standard variable rate loans. Homeowners may find it increasingly difficult to afford a mortgage whilst those with money problems may find it impossible to re-mortgage as banks and lenders tighten up on their lending criteria. The level of repossessions is relatively low at the moment, although there had been a sharp rise since 2003 with the Royal Institution of Chartered Surveyors predicting that nearly 45,000 people will lose their homes in 2008

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Article referenced from http://www.independent.co.uk/money/mortgages/many-mortgages-at-risk-fsa-warns-775679.html

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