Tracker loan warning issued by site

23/09/2009

Many people are failing to take advantage of low interest rates - and might fall into trouble on their mortgages in future as a result.

Research from Unbiased.co.uk, a financial advice website, shows that 53 per cent of people who have a "tracker" mortgage are not making overpayments on their loans.

This decision could prove a mistake over the long-term, as the mortgages are currently exceptionally cheap to repay due to the Bank of England's decision to cut interest rates to an all-time low of 0.5 per cent.

Analysts expect the Bank to raise rates as the economy recovers from the recession - making the trackers much more expensive to repay.

Unbiased.co.uk also found that 24 per cent of tracker customers were currently taking the responsible step of using the extra cash they have to pay down other debts, such as large credit card balances and money owed on personal loans.

David Elms, chief executive of the site, said: "We're encouraged by the large number who are using their repayment savings to erode their more costly credit card and personal loan debts.

Commenting on the report, EuroDebt director Kevin Still said: "Around one in five of the homeowners that EuroDebt has taken on to a Debt Management Plan has early stage arrears with their mortgage or secured borrowing. Our Insolvency Practitioner has also seen a dramatic rise in the number of homeowners entering IVAs. Offering mortgage arrears advice and avoiding re-possession are becoming more integral parts of the debt advice service. We would recommend people to not borrow more money to service existing debts. If you are reliant on low interest rates to balance the books each month then long-term budgeting may be required."

He added: "The Centre of Economic and Business Research revealed that the average household had £160 a week of disposable income in August this year, however, households using credit have an average unsecured debt of over £21,000. If they pay three per cent per month on this then they would have over £630 to find out of this disposable income, which doesn’t leave much of a surplus. For millions there is a deficit at the end of the month."

The credit crunch and recession have resulted in increasing numbers of Britons having difficulties with paying their mortgages.

According to the Council of Mortgage Lenders, repossessions in the UK will rise from 40,000 in 2008 to reach 65,000 in 2009.

Tags; Debt Management and Banking, Young Family Finances, Credit Card Lifestyle,

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