Borrowers taking measures to avoid bad credit scores

Borrowers becoming increasingly stretched by the level of their mortgage repayments have scaled back other borrowing in an effort to get their finances back on track, according to the latest Alliance & Leicester research.

But the lender has also reported that saving levels remained low in the second quarter of the year, despite a rise on figures from the first quarter (3.1 per cent from 2.1 per cent).

Mortgage holders' savings are now worth less than half of those who have not taken out a home loan, the study added, but the former group is making a more concerted effort to avoid bad credit penalties.

Those with mortgages are 50 per cent more likely than the rest of the population to cut back on unsecured borrowing over the next six months, though base rate movements may soon offer some comfort.

"The continued growth in mortgage borrowing masked a big change in the behaviour of mortgage borrowers in other areas of their personal finances as they felt the pressure of higher rates," said Alliance & Leicester director of strategic planning Sean Murphy.

"With the next move in base rates now seen as more likely to be downwards, this could bring them some welcome comfort," Mr Murphy added.

Indeed, many analysts now believe that rates could be cut twice by next next May.

Have you been refused a loan? The Mortgage Provider can help. Submit your details here