Shock rise in number of people defaulting on their mortgages

Published 31st Mar 2011

The number of people unable to pay their mortgage bills has risen unexpectedly during the first quarter as lenders warn of further defaults if interest rates rise.

The result comes despite the bank's base rate being held at the record low of 0.5 per cent while consumer confidence suffered its biggest drop since the recession in 1992.

Lenders had hoped that the number of people defaulting on their mortgages would stay the same as the final quarter of 2010, but that was not the case.

There has also been a sharp drop in the number of new mortgages being applied for and a further decline is expected in the next three months.

Despite the mortgage defaults, house prices actually rose last month, with the average home going up by 0.6 per cent to £163,751.

The increase in the cost of a new home was the third increase in four months, accounting for a 0.5 per cent month-on-month rise, or 0.6 per cent for the more representative three-month-on-three-month figures.

Despite the rise, consumer confidence suffered its biggest drop in nearly 20 years, with a drop of eight points to minus 29 - the biggest monthly fall since the 1992 recession.


Economy graphic

The poll is the latest blow to the recovery after figures showed disposable income dropped for the first time in 30 years at the end of 2010 as pay failed to keep up with soaring inflation.

Nationwide has warned, however, that the positive figures on house prices are unlikely to mark the beginning of a strong upturn for the market.

Chief economist for the bank, Robert Gardner said: 'The outlook remains uncertain but, all things considered, this is unlikely to mark the beginning of a strong upturn in prices.

Source: ' ThisIsMoney '

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