With lender balance sheets continuing to be scrutinised, the Bank’s Credit Conditions Survey indicated that mortgage defaults were likely to rise in Q1 2008, while appetite for secured credit would decline.
The paper confirmed that ‘concerns about the macro-economic outlook, including the housing market’ were important considerations for the study, undertaken between 19 November and 12 December 2007.
Commenting, Bob Pannell, head of research at the Council of Mortgage Lenders, said: “This study corroborates other evidence of worsening market sentiment. This may increase the chances of rate cuts sooner rather than later if inflation remains subdued.
“Borrowers should make a New Year’s resolution to review their finances and plan ahead if they are coming off fixes later this year.”
The report coincides with findings from insolvency experts Grant Thornton, which estimated that up to 120,000 people could go insolvent during 2008. The organisation admitted that rising personal insolvencies could lead to a fall in house prices, mirroring recent YouGov research which indicated that 23 per cent of the UK population were finding their current debt levels ‘unmanageable.’
Mike Gerrard, head of Grant Thornton’s personal insolvency practice, said: “Sadly, many individuals spend at Christmas and pay no heed to the warning bells.
Come January, they find themselves in a situation where previous financial woes are compounded by the bills arriving from the festive season. In these situations insolvency becomes the only way out.”
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