Mortgage lenders to tell families to cut back

With the interest rates expected to rise, tens of thousands of financially struggling families are being phoned by their banks and advised to cut on their spending or risk losing their houses. These households are being urged to spend less on nights out, mobile phones, television subscriptions and gym membership and give attention to payment of their mortgage.

Secret credit checks to identify high-risk customers were being undertaken by banks as hinted by some bank officials. Financial experts said although it was common practice for banks to carry on credit checks on customers, it was exceptional for many families to be targeted following approval of their mortgage.

The current record low interest rate of 0.5 percent is expected to rise and about 30,000 borrowers are likely to have financial difficulties because of that.
An organization called UK Asset Resolution (UKAR) is going to contact around 2,000 customers weekly in the coming months and advises them on the best ways to manage their finances in the face of a rate rise.

A one percent point rise in the interest rates is expected to reduce disposable income of a UK household by £230 pounds a year. Therefore, the main aim of UKAR is to ensure that borrowers have enough money to pay off their mortgages rather than spend their disposable incomes on lifestyle or luxury items. Also the organization seeks to network people to charities which may provide additional financial advice.

According to UKAR, lower interest rates to a large extent have protected borrowers. However, Economists expect rates to rise at some point late next year as the UK’s growth start to accelerate.

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