The number of mortgages in arrears continued to fall in the second quarter to its lowest level since records began more than 20 years ago, according to the Council of Mortgage Lenders.
This is excellent news, reflecting rock-bottom interest rates and improving employment figures, as well as lenders prepared to be flexible and show forbearance. This month’s interest rate cut should provide further relief to those on variable rates, assuming lenders pass the reduction on in full.
However, there is no room for complacency. There are still many homeowners being repossessed or finding themselves in arrears on their mortgage each year, which begs the question: what will happen when interest rates move the other way and start to rise? How will people cope? We suspect that when it comes to their finances there are many people teetering on a knife edge and rate rises could easily push them over.
While it looks highly unlikely that interest rates will rise anytime soon, borrowers should still plan ahead and consider how they would cope with higher mortgage rates. For those who would struggle to pay their mortgage were interest rates to rise, a fixed rate makes a lot of sense, and there are some incredibly cheap deals available.
It is vital that borrowers keep their lender in the loop if they are struggling with their mortgage payments. It is much easier and less stressful to come up with solutions early on than further down the line when the options may be much more limited.