Households 'dangerously overstretched'
Published On 15 June 2007
Any further interest rate increases could mean some people do not have enough money to pay their monthly mortgage bills, a new study has warned.Consumer website Fool.co.uk has said that many consumers are already stretched to the limit financially and further interest rate rises could create a situation where people find themselves struggling with debt.
According to the website, the gross income of the average household in the UK is £32,800 - after tax, this works out at £26,700. With average household expenditure at £20,800 and £6,600 taken with mortgage payments, people in the UK are already at their financial limit.
However, the website has warned that many consumers could still be benefiting from fixed-rate deals agreed when interest rates were lower. As these begin to expire, people could find themselves short for money.
"The signs are not good for overstretched homeowners, and by implication the housing market," warned David Kuo, the head of personal finance at Fool.co.uk.
"With almost no contingency left in their budgets, another rate rise, even a small one, could see many homeowners struggling to meet higher mortgage costs."
"Homeowners need to act swiftly. It is vital that they revisit their budgets now and identify where savings can be made."
Mr Kuo added that people could have to cut their household expenditure by as much as ten per cent if interest rates increase again.
