Homeowners could be in for nasty mortgage shock over the next year
July 5, 2009
It has been claimed that many homeowners in the UK may be in for a nasty mortgage shock over the next year, as tighter mortgage lending regulations result in many being able to refinance to similar deals when their existing mortgage deal comes to an end.
Many homeowners may therefore find themselves pushed onto the lenders’ standard variable rate once their existing deal ends, and this could come just at the time when interest rates start to rise again.
At present interest rates are at an all time low of just 0.5 percent, but mortgage lenders have made it difficult for many to get the best deals. For those that have already gone onto low rate deals whilst interest rates have been coming down there could be problems ahead when the deal comes to an end.
Many feel that interest rates will start to go up again over the coming year, and with an increasing number of homeowners set to be pushed onto the lender’s standard variable rate once their current deal ends, many could find themselves struggling to keep up with their repayments.
One industry official stated: “This situation is a ticking timebomb. While interest rates are low, borrowers will be fine to sit on SVRs but once rates start to rise, which we expect to happen next year, payments could become unaffordable and lead to repossession for those who can’t cope.”
She added: “Anyone who thinks they will be in this position urgently needs to act. If you have a lot of credit card debt and other unsecured borrowing, you should pay this down to increase the amount you can borrow under a lender’s affordability criteria.”
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