'Affordability likely to worsen for borrowers'

5th February 2007

A leading economist has warned that affordability levels for borrowers and homeowners are likely to deteriorate over the coming year.

The impact of three increases in interest rates since August will worsen the condition of many Brits who are struggling with mortgage payments and unsecured debts, said Howard Archer, from analysis firm Global Insight.

He told the Guardian that consumers are "increasingly stretched" by high house prices, while tax and household bills are eroding disposable incomes.

"The risk of further deterioration will be magnified if the Bank of England raises interest rates further, as seems likely. Any renewed rise in unemployment would also aggravate the situation," he stated.

Mr Archer has also expressed concern over official figures that show there were 29,804 individual insolvencies in last three months of 2006, which represents an increase of 44 per cent on 2005.

He said the figures show that a "significant number" of Brits have borrowed to their limits and are in a "very vulnerable position".

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