Borrowers Less Willing To 'Stretch Themselves Financially'

Homeowners are coming under increased financial pressure, new figures indicate.

According to a study released by the Council of Mortgage Lenders (CML), payments made on mortgage interest over the course of October reached the highest peak recorded for more than 15 years. During the month, first-time buyers contributed just over a fifth (20.6 per cent) of their income towards mortgages, a slight increase from the 20.4 per cent noted in September and the uppermost point since 1991.

Meanwhile, consumers who are already on the housing ladder are paying 17.6 per cent of their salary, the largest proportion paid since 1992. As a result of making premium payments into mortgages, it could be possible that homeowners are experiencing problems in meeting other demands on their finances, such as utility bills, personal loans and credit card invoices.

The CML also pointed out that lending "remained strong" during the course of October, accounting for 33.5 billion pounds - a rise from 30.6 billion pouns during the same month in 2006. Further research from the firm indicated that those looking to take their first steps on to the housing ladder borrowed an average of 3.36 times their income in October, a fall from the 3.38 in September.

Existing homeowners, meanwhile, borrowed 3.02 times their salary - a figure unchanged for two months now. However, with the council stating that the majority of this lending was approved before the Northern Rock crisis and global credit crunch took full effect, it was suggested that borrowing via loans is set to be "more subdued".

Commenting on the data, Michael Coogan, director general for the CML, said: "October is the last month we expect lending volumes to be higher than a year ago as lenders and borrowers will behave more cautiously in an uncertain and slowing market environment.

Lenders have already responded to the credit squeeze by tightening lending criteria and increasing some loan costs. And looking ahead, any uncertainty in the housing market may mean that borrowers are less willing to stretch themselves financially. However, overall, in the coming months we expect the lending figures to be driven more by supply factors rather than lower consumer demand."

He added that those consumers coming to the end of their fixed-rate mortgage deals during the early stages of 2008 may well see an increase in their monthly repayments. However, Mr Coogan advised that the "potential impact" that this may have could be offset by the Bank of England's decision to lower the base rate earlier this month and predictions of future cuts. In turn, this may see homeowners manage to make loan payments and service other financial demands with greater ease than was originally anticipated.

Homeowners concerned about pressure on their ability to make mortgage repayments may wish to consider applying for a cheap debt consolidation loan. In taking out a consolidation loan, borrowers may be able to pay off numerous debts quickly and so free up more disposable income each month. A debt consolidation loan may be especially advisable for residents from Suffolk.

Figures from the Ministry of Justice indicated that the level of bankruptcies in the county increased by 13 per cent during the three months between July and September, in comparison to the preceding quarter. However, those who are wishing to reduce pressure on their spending but are looking to avoid the damage to credit files that bankruptcy can bring may find that a consolidation loan is for them.

About The Author-- Steve Smith writes for 1 stop finance shop where visitors can apply for cheap secured loans and also focuses on quick personal loans and poor credit loans for UK residents.

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