Economists predict interest rates could peak at 5.5% this month as 750,000 UK households at risk of mortgage default
Economists predict interest rates could peak at 5.5% this month as 750,000 UK households at risk of mortgage default.
UK interest rates could peak at 5.5% this month, according to a recent poll by Reuters, as economists predict that the Bank of England (BoE) will approve a 15th consecutive increase in its next meeting on September 21st in a further attempt to curb surging inflation.
Despite easing to 6.8% in July, inflationary pressures have continued to affect borrowers, with the Financial Conduct Authority (FCA) revealing over 750,000 households across the UK could be susceptible to missing their mortgage payments in the next two years, while defaults have increased by 30% in Q2 2023 – the highest level since 2009.
In light of this, Rameez Zafar and Zahra Hassan, co-founders of Eligible – the UK’s first AI-driven servicing solution for the mortgage market – explain what this means for existing and prospective homebuyers across the nation, alongside the critical responsibility that falls under banks and lenders to support financially vulnerable Brits amidst the current economic landscape.
The growing number of mortgage defaults is compounded by the inability for Brits to understand language used by their banks, often leading to poor decision making as a result.
Figures from IT service management firm, GFT, reveals that when it comes to Brits satisfaction with their banks’ digital capabilities, almost half (48%) of those surveyed do not trust their bank to help them manage their finances, while almost half of the British population reportedly also have low confidence when it comes to making decisions surrounding money.
As a result, Zafar and Hassan explain that utilising AI and behavioural data can help generate tailored financial expertise to prevent further defaults for struggling borrowers.
Highlighting the significance of improving the relationship between lenders and their customers to ensure that they receive the most relevant financial support in a period when household budgets are squeezed, Eligible was created to bridge this ever-apparent disconnect.
The white-label platform is currently used by a host of Britain’s leading lenders, using AI technology to analyse customers’ financial and behavioural data to detect if they are vulnerable to defaulting.
Once potential customers are identified, Eligible work with lenders to provide concise and digestible information that best supports their financial situation, tailoring bespoke communication to assist customers to make informed decisions about the most relevant products and services.
Until recently, experts have warned that interest rates could keep rising until early next year, peaking at levels between 6-6.5%. However, with the speed and size of interest rate hikes impacting both households and businesses, many are questions whether the central bank’s aggressive approach may need to be tempered especially given a recent slowdown in housing market activity.
1.5m UK households are currently on variable rate mortgages and could see their monthly repayments increase if interest rates go up further later this month, according to UK Finance, while 1.4m borrowers are currently on a fixed-rate deal set to expire this year.
Kindly shared by Eligible
