Fixed rate customer heading for a shock
July 18, 2007
Experts are warning that many Brits that went onto fixed rate mortgage loans two or three years ago could be heading for a gigantic shock, as their fixed rate period draws to an end.
Millions of people fixed their mortgages at competitive rates several years ago, and despite the rising interest rates over the past year have managed to avoid the financial pinch of rising repayments so far. However, once their fixed rate period ends, as many are expected to do throughout this year, millions will suffer the hit of four or five interest rate rises in one go.
Interest rates in the UK have risen four times since last August, and each rise has been for 0.25%, taking the base rate from 4.5% last August to 5.5% by this May. In addition to this, there is a widely predicted further interest rate rise of at least 0.25%
in July following a narrow decision to keep rates stable following June’s Monetary Policy Committee meeting, where even the governor of the Bank of England had voted for an interest rate rise.
Once this interest rate rise is applied, those with fixed rate mortgages that expire in the next few months will have to cope with five interest rate rises being applied all in one go, and for many this could tip them over the edge financially.
Mortgage repayments are expected to soar by hundreds of pounds a month for some homeowners, and experts believe that this situation is going to result in a further increase in bad debt levels as consumers struggle to keep up with their financial commitments, as well as an increase in the number of repossession, with consumers failing to keep up with mortgage repayments.
According to one analyst: ‘For some customers we see a 25-30% increase in interest payments.’
Alan Wright
18th July 2007
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