If you’re thinking about having another meal out this week or booking that second holiday then forget it. Meeting your mortgage repayments must come first above all luxuries, experts have warned.
The caution comes after it was revealed thousands of homeowners are to receive letters from taxpayer-owned banks asking them to focus on repaying their mortgage.
Banks Bradford & Bingley and Northern Rock are in the process of sending letters and making phone calls to more than 30,000 customers on behalf of UK Asset Resolution (UKAR) warning them about the possibility of losing their homes.
UKAR, which runs the £80bn worth of mortgages bailed out by the taxpayer following the credit crunch, is identifying customers on the brink of financial trouble in an attempt to persuade them to change their spending habits.
"Some people won't cope when interest rates rise, but for others there are remedies,” advised UKAR Chief executive Richard Banks.
In an interview with the Yorkshire Post, Mr Banks asked homeowners to “think about what is their most important debt”.
“It's not the credit card, or renewing their Sky subscription, or going out for the latest mobile technology, it's their mortgage,” he added. “They have been protected by low interest rates, but the consensus is that rates will start to rise late next year."
With major government spending cuts on the horizon, more and more homeowners will struggle to maintain the lifestyle they’ve grown accustomed to in the coming months and UKAR said around 10% of its customers are already having difficulties repaying their mortgages.
"At both Bradford & Bingley and Northern Rock Asset Management we are running a pilot and are phoning customers and asking them how things are going," said Mr Banks.
"We are also asking them what their plans are for when interest rates go up. Repossession is the last option for us. We want customers to look at their finances and change their behaviour."