A Bank of England working party has finally admitted that the level of unsecured debt held by UK households could determine their ability to maintain mortgage repayments. Their research highlighted the rising amount of secured lending since the mid-1990's, and examined the ability of households to repay their debts.
They found that those with past experience of payment problems were more likely to have problems repaying secured debt today. The report concluded: 'At household level, becoming unemployed with an interest income-gearing of 20% and above, high loan to value ratios and a heavy burden of unsecured debt are all associated with a significantly higher probability of mortgage payment problems. Saving regularly and having unsecured debt which is not a problem are both associated with a significantly lower probability of mortgage payment problems. The only non-household specific variable to have a significant impact is mortgage interest rates'.
Our view
What a shock!! If you are in debt, you may not get a mortgage!!! We wonder how much this research cost!!!!