Interest rate rise danger for struggling NI homeowners

As the latest NI Court Service statistics show a 6% increase in possession orders made, local advice charity Housing Rights Service (HRS) has expressed concern about the impact interest rate rises could have on households who are already struggling.

The Bank of England has signalled that it will start to raise rates gradually, suggesting they will settle at around 3 per cent within the next two or three years. Early indications are that this will start to happen in 2015.  While there is no absolute link between these rates and mortgage lending interest rates, historically both have tended to move in parallel.

Housing Rights Service (HRS) provides free, independent advice to people at risk of becoming homeless and part of this includes a mortgage debt advice service.  The service assisted over 1600 households during 2013/2014.

According to HRS an increase of 2 percentage points on a typical £150,000 repayment mortgage could push up monthly payments by an estimated £183 a month. For interest-only mortgages, monthly payments could jump to an additional £250 month. [1]

Nicola McCrudden Policy Manager with HRS says: “Borrowers on variable rate mortgages could be vulnerable to a rise in interest rates and need to be prepared to make cuts to their outgoings or increase their incomes. This will not be an option for the majority of our mortgage debt clients who have nothing left to cut and who are already doing all they can to maximise incomes.”

The charity is calling on local MPs and politicians to make the voices of struggling homeowners heard to the financial institutions at a UK wide level.

Ms McCrudden said: “Our local housing market is a very different place to the south of England. Repossession actions remain high and we have significant numbers affected by negative equity. A lot of people bought during the property boom and are just about meeting their mortgage commitments. A rise in interest rates will undoubtedly have serious implications for many of our clients. It is imperative for political and financial leaders to recognise that whilst an interest rate rise may curb a potential housing bubble in one region it could have devastating consequences for homeowners in another.”

According to figures from mortgage administration company HML, 41% of borrowers in Northern Ireland who have taken out mortgages since 2005 owed more than their house was worth during the last quarter of 2013.

Housing Rights Service wants people who are worried about mortgage payments to get free online advice www.housingadviceni.org or call 0300 323 0310

ENDS

Notes to editors:

For further information contact Claire at Housing Rights Service on 90 245640

Spokespersons will be available for comment

• Established in 1964 Housing Rights Service (HRS) is the leading specialist provider of independent housing advice in Northern Ireland.  The charity works to improve lives by tackling homelessness and housing problems.
• In addition to the Mortgage Debt Advice Service HRS, provided advice and assistance on over 40,000 issues related to housing during 2013/2014
• The charity also provided representation at 1,500 court hearings.
• In August 2011 Social Development Minister Nelson McCausland announced continued funding that will allow the Mortgage Debt Advice Service to operate until 2015.
• The latest repossession statistics are available at www.courtsni.gov.uk