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Debt charity warns of rise in mortgage arrears

Interest rate rises will push many into arrears

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Future interest rate rises will push many homeowners into arrears, fears the CCCS

Many homeowners will struggle to keep the roof over their heads this year, according to a new warning from national debt advice charity Consumer Credit Counselling Service (CCCS).

According to the charity, budget pressures such as high inflation and wage freezes are restricting the ability of many consumers to pay their mortgages. The interest rate rises that many experts expect in the coming months will push many homeowners into mortgage arrears.

Number of CCCS mortgage-related cases expected to rise

Many homeowners are already struggling, with the charity advising 90,000 homeowners last year, who owe an average of £30,160 in unsecured debt on top of their mortgage. While calls to CCCS’s mortgage counselling centre were down in 2010, CCCS says this reflects generally low mortgage interest rates over the past two years. It predicts that this trend will reverse once interest rates rise again.

The research found that a 2% increase in mortgage rates would lead to a £307 rise in monthly mortgage payments for CCCS clients across the country. As the average mortgage payment of a CCCS client is currently £562, this would be a 55% increase in monthly mortgage payments.

CCCS is also concerned that struggling debtors are using credit cards to pay their mortgages. If this is the case, interest rate rises in 2011 could have an immediate impact on homeowners’ ability to pay their mortgage.

Delroy Corinaldi, CCCS External Affairs Director, says: ‘So many households are just managing to make ends meet, that even a small increase in the cost of their mortgage may push them over the edge. As far as possible, families need to think how they could pay such increases and seek help at the earliest opportunity if they feel that they cannot cope.’

Which? borrowing and debt advice

If you’re struggling to meet your mortgage repayments, it’s vital to speak to your lender as soon as possible. For more information, read the Which? guide to avoiding repossession.

If you’re struggling with debt, read the Which? How to deal with debt guide, which includes contact details for free debt advice organisations.

CCCS ‘tweetathon’ next week on Twitter

Next Wednesday (13 April), CCCS will be holding a #debtday tweetathon on Twitter from 8am until 8pm. Focusing on the work of the charity’s counselling teams around the country, the CCCS team will be tweeting some of the human stories it hears every day. Which? Money will be covering the key findings from the online event. Follow @Moneyaware and @WhichMoney on Twitter to join in.

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