A third of mortgage borrowers are facing severe financial difficulties as a result of the global credit crunch, according to a report by Mintel, published yesterday.
The consumer research group said that 5.5 million people would be hit by higher monthly outgoings from rises in the cost of mortgages.
Mintel said nine percent of British mortgage holders were classed as sub-prime, while a further 24 percent were "non-standard" and relatively high risk because they had irregular incomes.
Meanwhile, according to a separate report by uSwitch, the price comparison website, indicated that one in four are now struggling with unmanageable debts while twelve percent have missed loan repayments in the last six months.
Cautious lending
Toby Clark, a senior finance analyst at Mintel said that subprime borrowers are “the tip of the iceberg."
“With lenders becoming increasingly cautious about who they give money to, many more mortgage holders will be offered less than favourable terms when they come to remortgage,” he said.
Mintel found that nearly 1.5 million borrowers have been dragged into the subprime trap after falling behind on monthly repayments.
The report said that “unconventional” borrowers, including the self-employed or recently divorced, were also likely victims – posing more risk to lenders.
Repayments
The number of UK adults classified as “non-standard” could rise to 20 million by 2012 from the present level of 18 million, if lenders continue to tighten their criteria, Mintel predicted.
"But ironically as lenders become increasingly cautious, these non-standard mortgages will become harder to come by, leaving more adults without the finances needed to buy property," Clark said.
About 53 percent of take-home pay is now taken up by debt repayments, uSwitch said.
November 28, 2007
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