Outlook remains bleak for fixed-rate remortgagers
The prospects for homeowners whose fixed-rate mortgages come to an end this year show no signs of improvement.
According to financial website, thisismoney.co.uk, rising mortgage rates mean that a fixed-rate loan taken out at 4.3% a few years ago is likely to be replaced at a new fixed rate of 5.6%, or at a standard variable rate of 8%.
Around 1.4 million homeowners coming to the end of their fixed-rate terms during 2008 are facing average monthly rises in mortgage repayments of between £200 and £500, and the “payment shock” could severely affect over 320,000 homeowners.
Recent research shows that almost a quarter of those on long-term fixed-rate loans are anxious about the higher repayments, with one in 20 (70,000) admitting that they have no idea how they will manage higher mortgage costs.
Some borrowers with poor credit histories are faced with having to secure “sub-prime” loans at penal rates of interest.
For example, a “sub-prime” borrower currently paying £875 a month on a £150,000 fixed-rate loan charging 7% interest could face a new monthly repayment of £1,156, under a new fixed-rate deal charging 9.25%.
The Financial Services Authority, the Government and the Bank of England have already raised concerns that repossessions will increase as a result of such sharp rises.
The Council of Mortgage Lenders has taken the unusual step of suggesting that some borrowers should sell their homes if the increase in repayments looks to be untenable.