me, there has been a substantial increase in the number of interest-only mortgages taken out, and repayments from interest-only mortgages are more volatile when interest rates change. So although houses have become increasingly affordable due to loose lending, those that have over-stretched themselves may find themselves running into trouble with repayments.

What is worrying is that repossessions have increased in 2007 BEFORE interest rate inc

Mortgage repossessions have leaped to their highest level in 5 years with a 65% increase in 2006.

Over 17,000 homes were repossessed in the UK last year, and this figure is expected to rise to 19,000 in 2007. However, whilst this is a very unsettling time for those facing repossession, by historical standards UK repossessions are still below the 10-year average.

Back in 1991 repossessions totaled 76,000, over four times greater than current levels. The housing market back in the early 1990’s was different in two important respects:

1) In 1991 the economy had just come out of a period of 15% interest rates which made mortgage repayments very unfordable. In 2007, even though we have had a number of interest rate rises in 2006, interest rates are still at comparatively low levels.

2) House prices were falling in 1991, which led to many falling into the negative equity trap – whereby people were unable to sell off their home in order to get out of trouble.

Since 1991, there has been an opposite effect, with low interest rates and a booming housing market making it easy for home-owners to afford mortgage payments and/or sell their house if they fell into difficulty.

However, as we reach the end of the housing market boom and interest rates begin to creep up, it is inevitable that once again home-owners will begin to struggle to keep up with payments.

The effects of higher interest rates take a while to filter through because many home-owners have taken out fixed-rate mortgages which insulates them against rate increases. Fixed-rates typically last for 2 years, so those who took out a fixed-rate mortgage in 2005 need to ensure that they can afford the inevitable jump in repayments in order to stop the threat of repossession.

At the same time, there has been a substantial increase in the number of interest-only mortgages taken out, and repayments from interest-only mortgages are more volatile when interest rates change. So although houses have become increasingly affordable due to loose lending, those that have over-stretched themselves may find themselves running into trouble with repayments.

What is worrying is that repossessions have increased in 2007 BEFORE interest rate incr

ent levels. The housing market back in the early 1990’s was different in two important respects:

1) In 1991 the economy had just come out of a period of 15% interest rates which made mortgage repayments very unfordable. In 2007, even though we have had a number of interest rate rises in 2006, interest rates are still at comparatively low levels.

2) House prices were falling in 1991, which led to many falling into the negative equity trap – whereby people were unable to sell off their home in order to get out of trouble.

Since 1991, there has been an opposite effect, with low interest rates and a booming housing market making it easy for home-owners to afford mortgage payments and/or sell their house if they fell into difficulty.

However, as we reach the end of the housing market boom and interest rates begin to creep up, it is inevitable that once again home-owners will begin to struggle to keep up with payments.

The effects of higher interest rates take a while to filter through because many home-owners have taken out fixed-rate mortgages which insulates them against rate increases. Fixed-rates typically last for 2 years, so those who took out a fixed-rate mortgage in 2005 need to ensure that they can afford the inevitable jump in repayments in order to stop the threat of repossession.

At the same time, there has been a substantial increase in the number of interest-only mortgages taken out, and repayments from interest-only mortgages are more volatile when interest rates change. So although houses have become increasingly affordable due to loose lending, those that have over-stretched themselves may find themselves running into trouble with repayments.

What is worrying is that repossessions have increased in 2007 BEFORE interest rate inc

ap – whereby people were unable to sell off their home in order to get out of trouble.

Since 1991, there has been an opposite effect, with low interest rates and a booming housing market making it easy for home-owners to afford mortgage payments and/or sell their house if they fell into difficulty.

However, as we reach the end of the housing market boom and interest rates begin to creep up, it is inevitable that once again home-owners will begin to struggle to keep up with payments.

The effects of higher interest rates take a while to filter through because many home-owners have taken out fixed-rate mortgages which insulates them against rate increases. Fixed-rates typically last for 2 years, so those who took out a fixed-rate mortgage in 2005 need to ensure that they can afford the inevitable jump in repayments in order to stop the threat of repossession.

At the same time, there has been a substantial increase in the number of interest-only mortgages taken out, and repayments from interest-only mortgages are more volatile when interest rates change. So although houses have become increasingly affordable due to loose lending, those that have over-stretched themselves may find themselves running into trouble with repayments.

What is worrying is that repossessions have increased in 2007 BEFORE interest rate inc

l begin to struggle to keep up with payments.

The effects of higher interest rates take a while to filter through because many home-owners have taken out fixed-rate mortgages which insulates them against rate increases. Fixed-rates typically last for 2 years, so those who took out a fixed-rate mortgage in 2005 need to ensure that they can afford the inevitable jump in repayments in order to stop the threat of repossession.

At the same time, there has been a substantial increase in the number of interest-only mortgages taken out, and repayments from interest-only mortgages are more volatile when interest rates change. So although houses have become increasingly affordable due to loose lending, those that have over-stretched themselves may find themselves running into trouble with repayments.

What is worrying is that repossessions have increased in 2007 BEFORE interest rate inc

me, there has been a substantial increase in the number of interest-only mortgages taken out, and repayments from interest-only mortgages are more volatile when interest rates change. So although houses have become increasingly affordable due to loose lending, those that have over-stretched themselves may find themselves running into trouble with repayments.

What is worrying is that repossessions have increased in 2007 BEFORE interest rate increases had time to take effect. This suggests that higher numbers of repossessions are being fuelled by personal debt rather than changing market conditions.