Watchdog warns of mortgage risk

More than one million mortgages held by UK homeowners offer "cause for concern", a new report has claimed.

The study, published by the Financial Services Authority (FSA), argues that one third of mortgages taken out between the second quarter of 2005 and the third quarter of 2007 contained a higher element of risk.

Among the factors identified by the report as causing concern are higher than normal loan-to-income multiples, higher loan-to-values and mortgages taken out for more than 25 years.

In total, 150,000 mortgages were categorised as offering a combination of all three risks, with the FSA warning that people's other debts could make the situation worse.

"It is not necessarily the affordability of the mortgage - it is their other debt," said Lyndon Nelson, head of financial strategy and risk at the organisation. "Consumers with other borrowings in addition to the mortgage are struggling."

Figures published yesterday (January 29th)by the Office for National Statistics revealed that mortgage repayments cost the average household £52 a week, accounting for 19 per cent of total household spending.

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