Homeowners feel the pinch as the crunch bites

Millions of UK homeowners are having to dig deeper into their wallets and savings to cover their mortgage interest repayments as the ripple effects of the global credit crunch really start to bite. The rising cost of a home loan is eating into the effective disposable incomes of millions of mortgage payers according to new data from the Bank of England. Average mortgage interest repayments are more than 20 per cent higher than a couple of years ago and the typical homeowner must now pay more than £135 a month extra in interest than at the same time in 2007. The danger is that thousands of property owners have over-stretched themselves as they have struggled to get a footing on the housing ladder. Mortgage arrears and home repossessions are on the rise and there is no guarantee than future interest rate cuts by the Bank of England will be passed onto borrowers by the mortgage lenders because their own profits are under pressure from the rising cost of borrowing money in the wholesale markets.

Hundreds of thousands of homeowners will have to renegoiate their loans in the coming months as two-year fixed rates come to an end. And the stream of new borrowers are finding that credit conditions are being tightened, meaning that money is nowhere near as easily available - the credit crunch is impacting directly on people at the sharp end of the property market. And as effective disposable incomes are squeezed, so too will the level of discretionary spending on the high street and in the retail malls.

Suggestions for Reading Daily TelegraphCost of home loan highest in seven yearshttp://www.telegraph.co.uk/news/main.jhtml;jsessionid=HZAFUDIVT3Q33QFIQMFSFFWAVCBQ0IV0?xml=/news/2008/01/07/nrates107.xml BBC newsBank warns on mortgage defaultshttp://news.bbc.co.uk/1/hi/business/7169389.stm