Unoccupied property insurance clients will be interested in some news about the difficulties some people are having in meeting their mortgage obligations. There is evidence that arrears cases are on the rise which could lead to more repossessions if the economy turns down, especially if interest rates go up. The credit rating agency Standard and Poor’s says that 20% of all “problem” mortgages are now classed as “severe” – twice the level a year ago.
Standard and Poor’s credit analyst Mark Boyce is quoted in The Telegraph (www.telegraph.co.uk) saying: “ The severe arrears overhang is, in our view, a troubling sign, and suggests that future economic stress could well lead to a considerable increase in repossessions in the medium term”.
Interest rates have been low for some time and people on variable rates will see an increase in their repayments if rates go up. The concern is that if people are falling into arrears at a time of low rates what will happen if rates rise?