Homeowners in Northern Ireland have seen mortgage debt increase by 10 times over the past five years.
Figures provided exclusively for the Belfast Telegraph also revealed that mortgages account for a fifth of all recorded debt here.
According to Citizens Advice Bureau (CAB) statistics, one person in every 20 who contacts the government agency’s specialist unit does so because they're struggling to meet repayments on their home.
In 2006, local CABs recorded debts of around £475,000 from its clients; today, that figure has rocketed to £5m, and is a pointer to a worrying overall picture.
CAB’s chief executive Derek Alcorn — who oversees the ‘Dealing with Debt’ service — has admitted the situation is likely to get worse before it gets better, with inflation hitting a two-year high and interest rates set to rise.
“The statistical trends show that mortgage debt has increased by a factor of 10 since 2006,” said Mr Alcorn.
“It is clear that people are already struggling with mortgage repayments, which means an increase in interest rates will put many more people into difficulty.
“Any hike is also likely to precipitate more mortgage repossession cases.”
Some experts are forecasting that the higher-than-expected inflation figure would force the Bank of England to raise rates this spring. And they predict that they could rise by 2.25 percentage points to almost six times the current rate of 0.05% in two years.
This could have dire consequences for the thousands of homeowners in Northern Ireland who have variable rate loans.
Meanwhile, the Council of Mortgage Lenders has said that almost three million people in the UK have mortgages that are not defined as “affordable” by the Financial Services Authority.
Even if rate increases were more modest — between one and two percentage points, for example — an estimated 1.6 million mortgages would still be “unaffordable”, according to the guidelines.
A 2% interest rate rise would push up the cost of a £150,000 |interest-only mortgage by £250 a month.
In the last nine months of 2010 alone, CAB’s specialist service dealt with total debt of £23.9m, of which £5.9m (or 18%) was mortgage debt.
These figures are indicative of a rising trend, not to mention caseload for money advice experts.
“We would say that a relatively small number of people are dealing with an increasing amount of mortgage debt,” Mr Alcorn said.
“If interest rates rise as predicted, many more will be pitched into difficulty — by which we mean housing problems and repossession claims by lenders.”
Last year, CAB reported that the level of debt in Northern Ireland had risen by almost 40% in one year, and that’s just based on the people who have come forward for help.
mortgage debt: facts AND FIGURES
Percentage of CAB callers who need urgent mortgage help
Extra cost per month of 2% interest rise on a £150,000 mortgage
Amount of mortgage debt CAB dealt with in the last nine months of 2010