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Finance

UK homeowners 'at risk'

28/11/2007

One in three mortgage holders could face serious financial difficulties as a result of the ongoing credit squeeze, a new report has warned.

Some 5.5 million home-loan borrowers, 33 per cent of all UK mortgage holders, are at risk, according to market research firm Mintel.

It claims so-called 'non-standard' borrowers are set to face higher mortgage costs as home-loan providers tighten their lending criteria in the wake of the global credit crunch.

Lenders have become increasingly wary about who they lend cash to as a result of the turmoil on the credit markets – prompted by rising default levels in the US sub-prime mortgage sector.

The specialist home-loans market provides mortgages to those on low incomes or with poor credit ratings, usually at a high cost.

Mintel estimates that of the 16.5 million mortgage holders in the UK, 1.5 million (nine per cent) are now considered to be sub-prime borrowers.

But it warns a further four million (24 per cent) are also seen as high-risk by lenders because they are self-employed, lack a steady income, have frequently moved home or have fallen into arrears with household bills.

The "unconventional" financial situation of such homeowners means they are now likely to face higher repayments and increased lenders' fees when they come to move or remortgage their property, Mintel claims.

It says borrowers coming off fixed-rate mortgage deals will be particularly hard hit by more conservative lending criteria, stressing many homeowners will be unable to absorb any increase in home-loan costs prompted by the credit crunch.

"The focus over the last few months has very much been on sub-prime borrowers, but they are only the tip of the iceberg," said Mintel senior finance analyst Toby Clark.

"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 added.