Experts predict a rise in repossessions as mortgage rates are hiked
As more and more lenders begin to hike up the rates on their standard variable rate mortgages, experts are predicting a sudden rise in home repossessions as mortgages become less affordable to those already tied into them.
The standard variable rate (SVR) is an interest rate assigned by the bank themselves, rather than the Bank of England (which has its own base rate) and lenders are blaming an increase in funding costs for the move, which has seen more and more lenders jumping on the bandwagon in recent months, causing unease in those with SVR mortgages.
A number of major lenders have increased their rates recently, and a number of others have announced plans to raise their rates imminently. This means that the majority of borrowers on these loans are faced with the idea that their monthly mortgage repayments are likely to go up in the near future. For most people, this will not be a welcome change, as it means higher costs each month that some people may just not be able to afford. For those on low incomes, or with contractor mortgages, this may cause them to become trapped in a mortgage they cannot afford. The rise in rates means that remortgaging may not be an option, and with the tightening of restrictions on some interest only mortgages, and the cessation of other mortgage products, the consensus between lenders seems to be pay the higher rates or risk having your home repossessed.
Borrowers are encouraged to speak to their lenders or a financial adviser if they are worried, in order to help them find a way to pay off their mortgage which will not cause them long term financial difficulty, and if it is still possible to move onto another mortgage type this could be a helpful idea also.
For those looking to take out a mortgage in the next year, it is a good idea to go for a fixed or tracker plan, as economists predict the base rate will not move anytime soon, and is currently at a historic low of 0.5%. Customers should bear in mind, though, that a fixed mortgage will only remain fixed for a certain amount of time before it reverts to the lenders own SVR, and if this will make the mortgage unaffordable it is worthwhile not to choose this type of plan.
Article by: Rebecca Sidwell, Senior Mortgage Consultant at Contractor Mortgages Made Easy
Media Contact: Raman Kaur, Public Relations Manager.
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