Bankruptcy warning for homeowners Submitted on 05.10.2011

The number of home owners unable to keep up with their loan repayments is expected to rise, the Bank of England has warned.

It follows an “unexpected” rise in numbers since the beginning of the year, it reported on Thursday. The Bank predicts the total number of mortgage defaults will rise during the next three months as fears intensify that the cost of living will remain high and interest rates will rise.

In its Credit Conditions Survey, it suggested that lenders were concerned about “the potential impact of increases in interest rates on default rates”.

Britain’s biggest mortgage lender, Halifax, yesterday took steps to guard against people defaulting on their home loans by announcing a clamp down on interest-only mortgages.

It now requires a deposit of 25 per cent for interest-only mortgages, up from 15 per cent.

It brings further misery to households as economists warned yesterday that house prices remain too high and have further to fall this year.

The average price of a home in Britain rose in March to £164,751, up 0.5 per cent on the previous month and up 0.1 per cent on a year ago, according to Nationwide.