Families With Mortgages Are Cutting Back
23rd October 2007
British families are feeling the effect of the five base rate rises since last summer, and are pulling in their horns, according to the latest Borrowing Monitor from Alliance & Leicester. In July last year, before the first of these rises, the Thermometer stood at ‘fighting fit’, whereas now that interest payments are consuming more household income, the Thermometer shows people are feeling less comfortable.
However, with interest rates now unlikely to hit the 6% level widely predicted in the summer, and with borrowing slowing, we may see household budgets looking less stretched, especially if rates start to drop again.
To cope with the increases in mortgage payments and other household bills, families are pulling in their horns by cutting down on their other borrowing and are saving less. By contrast people living in rented accommodation aren’t cutting back and are also worrying far more about their borrowing than those with mortgages.
Sean Murphy, Director of Strategic Planning at Alliance & Leicester said: “Families are cutting back on their borrowing and their saving to help ensure they can afford higher mortgage and other household bills.
“Even though average interest rates on unsecured borrowings have actually fallen over the last 12 months, that has not been enough to tempt mortgage borrowers to take on more unsecured debt. Their family budgets have been under pressure and they have cut their cloth accordingly.”
Not only are savings for this group is at an historic low, they are also cutting down on credit card and other debt.
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