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Debt advisers expecting flood of enquiries

October 25, 2007 by admin  
Filed under News, News-Mortgages

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According to a recent report debt advisers across the UK are gearing themselves up for a flood of debt related enquiries as thousands of fixed rate mortgage deals come to an end. Many consumers across the UK took out fixed rate deals in 2005 for a two year period, with a low fixed rate of under 4.5% in many cases.
However, since that time interest rates have rocketed, with a series of five interest rate hikes in the space of a year, taking the rate up to 5.75%.

The credit crunch that was sparked in the United States sub-prime sectors has also had global repercussions, and has resulted in some lenders hiking up their mortgage rates even further. This means that the thousands of people that will be coming out of their fixed rate deals will not only face a huge rise in their interest rates and mortgage repayments, but will also find it increasingly difficult to remortgage to a more competitive deal.

Even those that switch to another fixed rate will have to fix at a far higher rate than they did in 2005, which means a huge rise in their monthly repayments.

It is thought that in the coming months around twelve thousand homeowners will see their fixed rate periods come to an end, and will face repayment rises of 40%. This means that many will have to find hundreds of pounds extra each month in order to continue with repayments on their mortgages, and this could send many households into the red, tipping them over the financial edge and leaving them facing repossession.

All homeowners that are due to come out of their fixed rate deals will face these problems, with many lenders having hiked up their standard variable rates to 8% or more. However, sub-prime borrowers will face severe affordability problems, as many sub-prime lenders have increased their rates to beyond 10% according to some experts.

It is thought that both the level of debt enquiries and the level of repossession will increase over the coming months as a result of this situation. The Consumer Credit Counselling Service has announced that it is opening a specialist repossession advice centre to deal with the severity of the situation.

Tom Smith
25th October 2007

Tags: Loans, end, credit, fixed, Mortgages, debt

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