Concerns over the end of cheap fixed rate deals
Concerns are rife across the UK in relation to the many consumers that are currently on cheap fixed rate mortgage deals that are due to come to an end in the coming months.
Many people that took out cheap fixed rate deals two or three years ago are due to see their fixed rate periods end, which means that many will have to switch to the lender's standard variable rate, which could add hundreds of pounds a month onto their mortgage repayments.
Experts are concerned that this could result in a rocketing level of repossessions in the UK, as homeowners struggle with keeping up with their repayments. In fact, the Council of Mortgage Lenders has suggested that some people should consider selling their homes rather than facing the prospect of having to move to the lender's standard variable rate, add hundreds of pounds to their repayments, and end up losing their home because they cannot keep up with these repayments.
Around 1.4 million homeowners are due to come off cheap fixed rate deals and switch to higher interest rates in the next 12 months according to the Council of Mortgage Lenders.
One official from the CML stated: 'There is a potential payment shock of anywhere between 30% and 60% for many.' Although some homeowners will be able to switch to another deal such as a discounted rate there are people that may not have any other choice but to revert to the standard variable rate.
The CML official also said: 'We are facing very difficult times. We have a number of uncertainties in the market. We've effectively had two seismic events that we've still not recovered from - the earthquake of the capital markets closing because of the problems in the US subprime market and the earthquake of the Northern Rock bank run.'
29th November 2007
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