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Rising job losses could see mortgage stress rise to levels higher than those recorded during the interest rate pain of 2008, Fujitsu Consulting has warned.
According to Fujitsu’s latest Mortgage Stress-O-Meter, released yesterday, the number of households in mortgage stress fell a further six per cent in January to just 635,000. This compares to a peak of 900,000 in August last year.
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Martin North, managing director of Fujitsu Consulting, said the latest research highlighted that for many concerns about the cost of living had dissipated thanks to falling rates and fuel prices. However, he cautioned that there was “growing concern about the potential for rising unemployment to drive stress up”.
Fujitsu has forecast unemployment to rise to five per cent by July and seven per cent by 2010. As a result it expects the number of households suffering mortgage stress to blow out to 929,000 by July, of which 302,000 will be in severe stress.
On average, Fujitsu says five per cent of households in severe stress go on to default on their mortgage.
“This will more than offset any upside offered by the increased first time buyers grants or further rate cuts and we expect house prices [to] drift lower over the coming months,” Mr North said.
Fujitsu’s mortgage stress figures are determined by surveying a rolling 26,000 consumer sample. Participants are asked a series of structured questions, rather than using the 30 per cent income rule, which it claims is more accurate.
