Wed 27th Feb, 2008
Fixed-rate borrowers warned to be ready for a shock
Thousands of Britons have been warned to prepare for a shock as they face crippling mortgage repayments as a result of the global credit crunch which has been affecting the financial markets.
Some people on fixed rate mortgages could be facing repayment surges of up to 60% as the terms of their fixed rate mortgages come to an end in the coming months. This could result in the number of repossessions ballooning as there are more than two million homeowners who are facing the prospect of their cheap fixed rate deal coming to an end over the next 18 months.
Many of our banks have begun to tighten up on their lending criteria as a result of the credit crunch which finds its roots the US’s sub-prime sector, responsible for organising bad credit loans. The credit crunch was also responsible for the downfall of Britain’s fifth largest lender Northern Rock in September.
Almost everyone who is going to be coming off a fixed rate mortgage deal will be likely to have to pay more even if they do manage to get a new fixed rate deal it will not be as affordable as the one that will have just ended.
However those at biggest risk of facing massive increases in home loan repayments is anyone who has a black mark on their credit rating. Lenders have tightened up lending criteria considerable and are less likely to take on risk. As a result thousands of Britons are going to be forced to switch to their lenders standard variable rate once their fixed rate deal comes to an end. The standard variable rate can cost as much as 2.5% more than the fixed rate deal they are currently on.