Situation eases for cheap fixed rate customers
According to a recent report the situation for consumers that are currently on cheap fixed rate mortgages that are due to come to an end is far less bleak than it was some months ago, with interest rate having fallen twice in the past few months.
After the base rate soared to 5.75% between August 2006 and July 2007 it was feared that many people that were due to come off cheap fixed rate deals taken a couple of years earlier would find it impossible to cope with the sharp rise in interest rate and mortgage repayment.
However, the interest rate now stands at 5.25%, and many officials have stated that the payment shock to those due to come of cheap fixed rates will not be anywhere as bad as had originally been expected. In fact, according to officials from the Council of Mortgage Lenders, some homeowners could find that their repayments only rise by around £30 or so each month, which is far less than had originally been anticipated. In fact the Financial Services Authority had recently claimed that some borrowers coming off cheap fixed rates could be left looking for hundreds of pounds more to meet their mortgage repayments each month.
Based on a borrower with a £114,000 repayment mortgage officials from the Council of Mortgage Lenders stated: "We estimate that the monthly increase for a borrower coming out of a two-year fix and choosing a new bank rate tracker will have declined from £140 in the first quarter to £39 in the fourth."
The CML also said: "The intensity of payment shock is likely to decline markedly as the year progresses. The level of shock is unlikely to be as great as the FSA suggests if borrowers choose follow-on deals rather than default to the SVR."
28th February 2008