British families are unable to justify repaying the capital off their mortgages as inflation eats into their personal finances.
Mortgages totalling more than Â£60 billion have been moved from capital repayment to interest only saving on average Â£250 per month leaving banks concerned as to how the debt will be repaid.
This move by borrowers onto interest only mortgages goes against the Financial Services Authority recommendations and possible forward policy projections to "constrain future interest-only lending".
Concerns have also been raised by economists and bodies linked with the mortgage industry as to the effect this will have on borrowing which may possibly tighten the lending criteria even further.
According to the Telegraph, Darren Winder who is an Economist at Oriel said "For someone who's trying to alleviate monthly cash flow pressure, moving to interest-only makes sense. But it does raise questions about how that loan gets repaid."
Lenders have already cut the number of interest only deals available to borrowers by 18.1% in order to reduce risk.
This is clearly a desperate situation which U.K. households are now facing.
The news comes as further bad news to the housing market however some economists are predicting a future rise of 16% in house prices in the next 4 years.
Could inflation push house prices higher or will interest rates rise because of said inflation leaving the housing market facing a sharp decline in prices over the next few years?
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