Unmarrieds face dearer mortgages

BRISTOL & WEST, Britain's tenth-largest building society, is considering charging higher rates of interest on mortgages for young unmarried borrowers.

The rates would reflect the higher likelihood the society believes exists that these borrowers will default on their loans.

Bristol & West, which made provisions of pounds 29.7m for bad debt in the first half of this year, up from pounds 7.2m a year earlier, has been studying repayment records among its borrowers.

A spokesman said last night that it was looking closely at introducing differential rates for those it considered higher-risk. Among these would be young unmarried couples and young people living together as friends.

It is understood that the society may charge these borrowers up to 4 percentage points more for mortgages than individuals it considers a low risk.

Bristol & West has noted that married couples are less likely to default than unmarried couples, and that risk reduces as the age of borrowers increases.

All building societies have recognised a high level of arrears and repossessions among younger borrowers, although many of these stretched themselves to the limit to buy houses in 1988 before multiple tax relief was scrapped.

From August that year it was only possible to claim tax relief on the first pounds 30,000 of a mortgage per property, whereas previously each individual unmarried borrower was able to claim pounds 30,000. Married couples were always restricted to pounds 30,000 between them.

Many building societies have been looking recently at reorganising the way they price their mortgages. This has been prompted partly by tough new rules imposed by the insurance companies covering the top slice of loans against losses on repossessions.

Bristol & West, which is believed to be considering introducing the new system from the middle of next year, has gone further than most.