Mortgage debt not cleared

Despite historically low interest rates a new study has found that many are not taking the chance to reduce their homeowner debt by making overpayments on their mortgage.

A report by Capital Economics has found that the lower rates have failed to help householders reduce their mortgage debt by as much as expected, amid fears over a fragile housing market.

Even though repayments have been lower for those on variable rate mortgages, the recession saw an increase in the number of people who have fallen into mortgage arrears.

Things are likely to get worse for many homeowners struggling with debt problems as the housing market is likely to be hit by new measures contained in the upcoming emergency budget.

Kevin Still, director of Atlantic Financial Management, says: "The fact that many homeowners haven't used low interest rates to reduce mortgage debt is a measure of the potential problem when rates go up.

"Many homeowners have been trying to reduce unsecured borrowing, like credit cards debts and overdrafts, whilst others are just about keeping their heads above water with rates at the level they are now. We expect to see more homeowners seeking debt solutions in 2011."

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