Mortgage shock on horizon for many
May 15, 2007 by admin
Filed under News, News-Mortgages
Borrowers with a fixed-rate mortgage managed to avoid the recent interest rate rises but some are set to see their payments increase.
The reason, says mortgage broker London and Country (L&C), is that those who took out a mortgage two or three years ago may be about to see their fixed-rate deals come to an end.
L&C points out that the best two-year fixed-rate mortgage available in May 2005 was available from Newcastle Building Society, with a rate of 4.49 per cent and a fee of £420.
On a £150,000 interest-only loan, a borrower would have been making monthly payments of £561.25 per month. However, once the fixed-rate deal ends, borrowers will be paying 7.34 per cent interest, taking monthly payments up to £917.50.
“The payment shock for many borrowers will be substantial when their deals to come an end and it’s important that they do all they can to minimise it,” said James Cotton, mortgage specialist at L&C.
“The advice is simple: see what new deal your lender is willing to offer and shop around elsewhere.
“Most importantly, plan ahead and don’t leave it until you’re already paying Standard Variable Rate,” he added.
Borrowers are advised to try to get the best deal when taking out a mortgage for the first time but must be prepared to pay higher rates of interest once the deal comes to an end.
