Mortgage payment holidays `may leave people in more debt`

8 January 2009

Government-backed deferred payment schemes and mortgage payment holidays may end up leaving homeowners in greater debt, according to one expert.

David Kuo, head of personal finance at fool.co.uk, said that such measures are no cure for struggling consumers and will only result in them experiencing greater financial troubles in the future.

He made his comments in response to research from uSwitch, which suggests that almost two million people are considering a mortgage payment holiday.

This could push up monthly repayments by a combined total of £54 million and increase total interest by £7.2 billion.

In addition, as house prices continue to fall, the cost of a mortgage payment holiday could take people closer to negative equity.

Mr Kuo said: "There are some flexible schemes out there that will allow people to take mortgage holidays, but you have to remember that if you do take one it doesn`t mean that you don`t have to pay your mortgage, because the interest continues to accrue."

Tags: mortgage payment holiday, mortgages, debt, personal debt

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