Many homeowners have failed to protect their income
A recent report has suggested that the homeowners of today have failed to learn any lessons from the economic problems that faced the country in the early 1990s, when there was a major house price crash, many homeowners were plunged into negative equity, and many people found themselves unable to keep on top of mortgage repayments, resulting in their homes being repossessed.
The research was carried out by AXA insurance services, and the results of the research showed that whilst 90% of single earning families in the UK had a mortgage, only 16% had cover in place to protect their income so that they would be able to keep on top of mortgage loan repayments in the event of something unexpected occurring. The insurance giant said that homeowners in the UK are therefore currently more at risk of falling behind with their mortgage repayments and even having their homes repossessed.
With the majority of single earner homeowners having no protection in place to ensure that they can keep up with repayments in the event of hardship, AXA officials state that many have failed to learn any valuable lessons from the darker days of the 1990s. At that time around 16.5% of homeowners experience some form of difficulty with mortgage repayments and around 3.54% fell into arrears of six months of more.
During the 1990s most lenders offered around 2.5 times the borrower’s income in terms of income multiples, but over recent years those purchasing a property have been able to borrow far more – in some cases up to seven times the income. Many people have also taken on a second home in the booming buy to let market over the past ten years.
