Mortgage borrowers are finding it easy to meet loan repayments, despite being the group most vulnerable to overstretching themselves with other debt.
The findings come from a Council of Mortgage Lenders’ (CML) survey, which revealed mortgage borrowers are far more likely than other households to have additional loans, finance deals and credit arrangements as lenders regard them as an attractive proposition.
Although borrowers seem happy meeting their mounting repayments, the CML has warned that those with low levels of savings are more likely to have debts that consume a high proportion of their income, making them more prone to a loss of earnings.
According to research from the Department of Social Security, 37% of couples without children have less that £1,500 in savings ‘ typically enough to cover just two months’ mortgage payments. Almost half of households with a gross annual income of £20,000 also have savings below the £1,500 mark.
Michael Coogan, director of the CML, said: ‘It is reassuring that the survey found that most households are coping with debt. This is borne out by the decline in mortgage arrears, but neither lenders nor borrowers can afford to be complacent about the future.
‘Against the current economic backdrop, it would be worrying if there were large scale problems in coping with debt. The fact that some households are struggling, or appear vulnerable to adverse events like an unexpected loss of income, should encourage caution.’
Coogan said borrowers should take out mortgage payment protection insurance (MPPI) to provide security against their debts.
With only 31% of UK borrowers having MPPI in place, Paul Fincham, spokesman for Birmingham Midshires, agreed with Coogan.
He said lenders and advisers should encourage borrowers to take out cover, to provide protection should the worst happen.
‘There is a great deal of complacency about insuring the regular household income ‘ this is a dangerous position for many of us. Homeowners must take responsibility to protect their home and it is a small price to pay for their most valuable asset,’ he said.