A report has warned of new housing market struggles that could be on the horizon.
The Resolution Foundation aims to improve the living standards of the 15 million people in Britain on low and middle incomes, by doing research and bringing to light certain issues that can help to influence changes for the better.
The Foundation have urged financial regulators and the government to do something about the fact that they found up to 2 million people were likely to fall into serious financial trouble, once the interest rates on their mortgages rise from 0.5% to 3%.
A state backed plan will be necessary to prevent all these people from falling into arrears once the rates increase, or a huge number of households could be forced to hand over their keys, the think tank says.
The chief economist at the Resolution Foundation, Matthew Whittaker, said that the report had been put together after consulting with both big banks and consumer groups. “The magnitude of the stock of debt is simply too large given expectations that income growth will be gradual at best” he said.
“We need an orderly and carefully managed approach to managing the debt overhang in order to minimise the numbers pushed over the edge as borrowing costs rise and to improve the safety net in place for those who can’t avoid such an outcome” he added.
There have been proposals for dealing with the issue, including ones to negate the damage, such as standardising the way in which repossessed homes are sold, so that indebted families are not also burdened with fees.