Stark warning of problems ahead

Apr 9 2008 by Adrian Pearson, The Journal

FINANCIAL experts have warned that the North East could be the UK’s worst-hit region as the global credit crunch continues.

The level of debt and number of households with poor credit ratings have convinced researchers at one of the country’s leading credit agencies that North homeowners are most likely to fall victim to a downturn in the economy.

The findings were last night dismissed as political scaremongering by one North MP.

A debt league table has suggested that more than 300,000 households in the North East have debt problems which could make repaying their mortgages even harder as costs rise faster than wages.

Credit agency Experian has put together a map showing where it believes the greatest risks are and which regions are most likely to have trouble paying back mortgages if the global slump continues.

George Bridge, a former political strategist for the Conservatives, helped put together the map and said it revealed where the unexploded sub- prime bombs were most likely to lie.

Using data on the number of households with a poor credit rating, Experian has estimated how many of these face the threat of bailiffs knocking on their door as a result of homeowners having trouble finding cheap mortgage deals, and how many are likely to be risky sub-prime mortgage holders.

Many of the worst-hit areas would be in Labour heartlands, with thousands of Tyneside homes already suffering from debt problems.

Mr Bridge said: “These are not welfare-dependent people, or estate prey for loan sharks.

“Experian’s typical sub-prime householder has had a county court judgment three or four years ago but is in work and cleaning up his act.

“As a result of the credit crunch, however, such people are now at a higher risk of defaulting on their loans.”

He added that the map showed the areas most likely to see a big rise in the number of home repossessions.

And the former Tory election planner said the rise in home repossessions in the North could lead to a surge in Conservative support as voters start to blame Gordon Brown for the worsening economy.

Tyne Bridge was the North East constituency rated most likely to suffer, but its MP David Clelland has accused the Tories of stoking up pre-election fears. The Labour MP said: “I think they are making a big leap from showing households with a poor credit rating to suggesting thousands of homeowners will be at risk of repossession.

“This comes before the local elections and it is obvious the Conservatives are hoping to scare homeowners into voting for them.

“The doom and gloom merchants who predict the British economy will collapse are quite wrong, and many of them are only repeating that line for political gain.”

Mr Clelland’s belief in the strength of the economy is backed up by One NorthEast boss Alan Clarke, who has previously told The Journal that the region is remarkably well-placed to survive the predicted slump.

The Citizens Advice Bureau is advising people on fixed-rate mortgages to take the time to plan for higher rates which may be forced upon them when they leave their current deal.

Homeowners wanting advice should go to www.moneyadvicetrust.org