![]() ![]() Therefore, although there was a rise in unemployment and low income growth, at least interest rates were low. This meant many people on tracker and variable mortgages saw their monthly mortgage payments fall. In fact the Bank of England cut interest rates to 0.5% (an historic low) to try and boost the economy. The current recession was caused by the credit crunch (not high interest rates). This meant many couldn’t afford the repayments and so they went into default. The sharp rise in interest rates saw the cost of mortgages almost double. The high interest rates caused tremendous difficulties for homeowners. The high interest rates were one of the main causes of the recession. The government had joined the Exchange Rate Mechanism and were trying to keep the value of the pound at a fixed level against the D-Mark.The government tried to reduce inflation caused by the Lawson boom.In the early 1990s UK interest rates were very high, reaching a peak of 15%. One factor that clearly explains different mortgage default rates is the base interest rate. (0.4%) (more mortgage default rates in UK) The peak in the current recession was 46,000 home repossessions in 2009. The peak for home repossessions occurred in 1991, when over 70,000 homes were repossessed or 0.77% of outstanding mortgages. Readers Question: What have been the drivers of the mortgage default rate in the 2008 recession compared to the late 1980s/ 1990s?ĭespite the depth of the recession in 2008, the mortgage default rate in the UK has been lower in the current recession than in the early 1990s. ![]()
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