Homeowners face huge hikes as mortgage deals expire
September 15, 2008
Over recent months many industry officials have expressed concern over the fact that a huge number of homeowners are due to come off cheap mortgage deals, such as cheap fixed rate mortgages that were taken out two or three years ago, leaving them to try and find a suitable affordable alternative or have to switch to the lender’s standard variable rate, which is usually far higher than the rate that they have been on with their special deal, equating to hundreds of pounds extra in repayments in some cases.
There are now dears that some homeowners’ mortgage repayments could soar by up to 40% in some cases based on them having to switch to their lender’s SVR simply because they cannot afford the crippling arrangement fees associated with remortgaging or cannot get another affordable deal due to the tighter credit conditions that have come into play since the onset of the global credit crunch last summer. This could equate to hundreds of extra pounds a month for some households.
It is thought that around a million homeowners could be facing increased interest rates and mortgage repayments as a result of their cheap deals coming to an end.
One industry official stated: ‘There is a growing number of borrowers for whom there is little choice. They will simply have to pay more.’ Another one said: ‘In the old days, competitive mortgage rates were typically available to anybody with more than five% equity. Now to get the best rates you need 25% or more.’
However, one official thought that some borrowers may prefer to switch to the lender’s SVR than look for an alternative, stating: ‘The advantage of the SVR is that there is no fee to pay - and with some fixed and discounted deals coming with fees of about £1,000 or more, it is easy to see why some borrowers prefer their lender’s SVR for now. The idea is that once a competitive fix or discount becomes available the borrower can then move on to that without paying a penalty or having to give any notice.’
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