The Bank of England is sounding the alarm over the number of home owners taking out 35-year mortgages
The Bank of England has sounded the alarm over the number of home owners taking out 35-year mortgages and warned that Britons are increasingly turning to credit cards to make ends meet.
The central bank said yesterday that more mortgage holders are extending the period they repay their loans as they struggle to make their monthly payments.
A longer mortgage term can ease spending pressure in the short term by reducing the amount you owe each month, but it can cause more financial pain in the future.
The share of new mortgage lending with terms of at least 35 years rose from 4% in the first quarter of 2021 to 12% in the three months to the end of June this year.
During that period, the bank raised the prime rate from 0.1 percent to 5 percent and has since increased it to 5.25 percent, meaning consumers are paying more interest on mortgages, loans and credit cards.
The Bank of England said more mortgage lenders are extending the period they repay their loans as they struggle to make their monthly payments
Some households switched to interest-only mortgages to ease the strain on finances.
In its latest financial policy brief, Threadneedle Street said that although the number of home owners with mortgage arrears had increased, the figure “remains low by historical standards”.
The bank also warned that some households are increasing their credit card spending as they struggle during the cost of living crisis.
“There is evidence that some households are increasing their use of consumer credit in response to cost-of-living pressures, which may lead to greater debt vulnerability,” the report said.