The past couple of years have tested people’s resilience in the face of soaring inflation, higher interest rates and, for many, a cost-of-living squeeze on incomes. In a recent Financial Policy Summary, the Bank of England (BoE) noted that many homeowners are still feeling the effects of higher interest rates – and many are dealing with them by increasing borrowing.
Longer mortgage deals
One result of these higher rates has been that some households have extended the length of their mortgage term. According to the report, there has been ‘a notable increase in the proportion of borrowers taking out mortgages with 35 year or above terms.’ Indeed, the proportion of mortgages lasting 35 years or more rose from 4% in the first three months of 2023 to 12% in the second quarter. [1]
The BoE explained that, while taking out a longer mortgage term does offer short-term relief, there were risks involved, notably the fact that ‘it could result in higher debt burdens in the future.’
Credit card use on the rise
Likewise, the BoE expressed concern that people feeling the pinch could start borrowing larger amounts on credit cards. So far, the annual rate of credit card spending growth has stayed relatively stable at 11.8%, though the BoE warned that the trend ‘could lead to greater debt vulnerability for households in the near term’.
🚨 Data accurate as of the date of publication – 04.03.2024
🚨Think carefully before securing debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.
🚨 The above material is for informational purposes only and does not constitute a sales offer or financial advice. Before taking out any insurance, credit agreement or other financial product, you should obtain individual advice on your requirements and the general terms of the contract.
