Belfast Telegraph

Northern Ireland homeowners are sitting on a 'mortgage timebomb'

Many facing huge struggle when interest rates rise

By Claire McNeilly

Thousands of Northern Ireland homeowners are facing an interest rates timebomb, according to an independent think tank.

Shocking new figures show that one in six are in danger of being overwhelmed by debt and trapped as a 'mortgage prisoner' in uncompetitive loans – a higher proportion than any other UK region.

Report author and chief economist at the Resolution Foundation Matthew Whittaker told the Belfast Telegraph that homeowners here will be hardest hit by future interest rate rises.

"There are two separate measures which then merge to create a combined, fairly toxic measure of the whole situation," he said.

"The first is affordability – which is a standard measure of how many people are paying more than a third of their income on mortgage repayments – and the second measure is this mortgage prisoner idea.

"That's someone who struggles to remortgage on to a new deal when they come to the end of their existing deal.

"In Northern Ireland, if you overlap those two groups – those who face potential affordability problems and can't move to insulate themselves – then it equates to 16% of the current mortgaged population or 30,000 households – and that's the highest proportion of any region across the UK.

"They'll struggle with repayments by 2018 once interest rates have gone up and there's not that much they can do to prepare for that because they're likely to be locked out of remortgaging."

Mr Whittaker said Northern Ireland was also the region where low equity was most common – as 35% of mortgage holders have less than 5% equity in their home compared to a national figure of just 9%.

"That's 70,000 households in Northern Ireland where very low levels of equity mean that people are unable to change their mortgages which means they're exposed to the rise in rates that have yet to come," he said.

"In terms of the overall affordability bracket – irrespective of if they're prisoners or not – that's 50,000 households in Northern Ireland."

Mr Whittaker added: "These numbers add to the argument for not raising interest rates any time soon."

Northern Ireland mortgage holders are classed as the most vulnerable because of a drastic slump in property values since 2007.

This has left many households in negative or limited equity, which makes them particularly vulnerable.

That's because instead of being able to switch to more competitive deals, most of them will have little option but to repay at their lender's standard variable rate, leaving them fully exposed to changes in the Bank of England's base rate.

The rate has been historically low at 0.5% for three years, but the think tank says this is expected to climb to almost 3% by 2018.

The Resolution Foundation's grim report comes as the latest house price data shows limited growth for Northern Ireland.

Figures for March from the Office of National Statistics reveal that prices rose by just 0.3% over the past year, while properties are still only worth half what they were at the height of the market in 2007.

The advice charity Housing Rights Service (HRS), said a 2% rise on a "typical" £150,000 Northern Ireland mortgage could push up monthly repayments by £183.

For interest-only mortgages, monthly payments could jump by an extra £250.

"A lot of people bought during the property boom and are just about meeting their mortgage commitments," said HRS policy manager Nicola McCrudden.

She added: "It is imperative for political and financial leaders to recognise that whilst an interest rate rise may curb a potential housing bubble in London, it could have devastating consequences for homeowners in another region."

House prices in Northern Ireland up by just 0.3% - lowest in UK 

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