The Daily Observer London Desk: Reporter- Victoria Smith
The Bank of England has sounded the alarm on the number of homeowners taking on 35-year mortgages and warned Britons are increasingly turning to credit cards to make ends meet.
The central bank said yesterday that more mortgage-holders are extending the period over which they pay back their loans as they are struggling to make their monthly payments.
A longer mortgage term can ease cost pressures in the short term by reducing the amount owed each month, but it could cause more financial pain in the future.
The share of new mortgage lending on terms of at least 35 years has risen from 4 per cent in the first quarter of 2021 to 12 per cent in the three months to the end of June this year.
During this period, the bank has hiked the base rate from 0.1 per cent to 5 per cent, and has since increased it to 5.25 per cent, meaning consumers are paying more in interest on mortgages, loans and credit cards.
The Bank of England said more mortgage-holders are extending the period over which they pay back their loans as they are struggling to make their monthly payments
Some households have switched to interest-only mortgages to reduce the strain on finances.
In its latest financial policy summary, Threadneedle Street said that while the number of homeowners in mortgage arrears has risen, the figure ‘remains low by historical standards’.
The Bank also warned some households are increasing credit card spending as they are struggle during the cost of living crisis.
‘There is evidence that some households are increasing the use of consumer credit in response to cost-of-living pressures, which could lead to greater debt vulnerability,’ the report said.
