The Debt Test: are you making out a mountain out of your mortgage?

Released on = July 13, 2005, 7:36 am

Press Release Author = Rachel Lane / bigmouthmedia

Industry = Financial

Press Release Summary = Whilst UK consumers as a whole may be trigger happy with their plastic, first-time home buyers show concern for financial protection

Press Release Body = According to the Council of Mortgage Lenders, first-time buyers are the most susceptible group of homeowners to debt, as they are more likely to have higher loan-to-value ratios and commit a higher proportion of their income to
mortgage repayments. Despite their susceptibility to debt, there is evidence which indicates that insurance take-up and employee benefits provide recent first-time
buyers with a safer foundation than the general population of mortgage borrowers.

The Council of Mortgage Lenders (CML) has become increasingly concerned about the ability of current and future home-buyers to pay back mortgages in the event of changing circumstances. Over the past five years, the CML and its partners within the Sustainable Home-ownership Initiative, have sought to improve this issue.
Contributing factors to the problem include increasing personal debt levels and a less certain economic environment. This has provoked concern about the
sustainability of home-ownership and consumer understanding of financial products, ensuring that the issue of mortgage risk is at the top of the agenda for the UK Government, industry regulators and public as a whole.

Over the last year, the Sustainable Home-ownership Initiative has debated the most effective move forward to increase home-buyers’ awareness of potential debt and protection from unforeseen events with insurance products, specifically Mortgage Payment Protection Insurance (MPPI). The Financial Service Authority is leading the way to help raise awareness of debt prevention with the “Debt Test” initiative.

According to research carried out by the Council of Mortgage Lenders, two thirds of recent first-time buyers say that an online debt test designed to help them assess potential triggers of debt and highlight future borrowing risk would be useful.

The mortgage market is also watched very closely by the consumer research website, moneynet. In addition to tracking market behaviour, property values and homeowner incomes, moneynet have endeavoured to become increasingly proactive about educating their visitors, so they fully understand the complexity of the relevant financial products. In addition to their mortgage comparison service and mortgage protection
options, moneynet published a comprehensive mortgage guide earlier this year, as part of its series of consumer product guides. Moneynet isn’t the only site to offer enhanced information services; Which? also offers a detailed mortgage guide and mortgage search tool powered by Moneyfacts. Both “Switch with Which?” and
moneynet take the consumer through the types of deal available, detailing the different interest rate structures including fixed rates, capped rates, discounted
rates, stepped rates and standard variable rates.

The CML state that there is much evidence to show that first-time buyers appreciate this information, including the “debt test”, more so than older households. This is
perhaps due to the fact that many first-time buyers have to borrow much more for their initial property, due to high prices, and that they have generated more
personal debt than their parents’ generation. Whilst personal debt remains a major concern for the finance industry, the government and the public, financial stability remains possible with education.

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Resources:

http://www.moneynet.co.uk/mortgage-guide/index.shtml

http://www.switchwithwhich.co.uk/mortgage/index.html

http://www.cml.org.uk/

Web Site = http://www.moneynet.co.uk/

Contact Details = Moneynet.co.uk is the UK’s most established personal finance research and data website. The company offers consumers a wide range of low cost
financial products: from mortgages and personal loans; to car, home and medical insurance; credit cards; savings accounts and best-buy fixed rate products.
Moneynet.co.uk is an ethical, impartial and comprehensive source of consumer finance
information, covering the whole of the personal finance sector.

Moneynet was founded in 1997 by Chief Executive Richard Brown to simplify the personal finance market and provide consumers with impartial and interactive
information on financial products and services.