The Kensington Group has reported an increase in mortgage arrears for customers, with interest rate rises cited as the cause. The percentage of people in arrears with their mortgage repayments by 90 days or more had risen to 6.8% in May. The figure was 5.8% at the same time last year.
Kensington said that the level of arrears at the moment was representative of 2002 where interest rates were at the same levels as they are now.
Our View
Interest rate rises will always take people by surprise, meaning that finances have to be restructured. This could take a few months to do and could be the reason for increased arrears. Many people are on lenders' standard variable rates, which obviously rise when interest rates increase overall. Many of these people do not realise that they could move onto a fixed or discounted product and save money.
If you are on the standard variable rate, check with your lender what other products are available. By paying the standard variable rate you will be paying too much interest.