Since the series of interest rate rises between August 2006 and July 2007, when five 0.25% rises took the base rate from 4.5% to 5.75%, there has been a great deal of concern about how homeowners on cheap fixed rates will cope.
This is because many people that took out a fixed rate mortgage two or three years ago when rates were low are due to see their low fixed rate period come to an end, and this could result in their mortgage interest rates rocketing when the rate reverts to the lender’s standard variable rate.
However, whilst there is still some level of concern over whether these homeowners will be able to keep up with their repayments once their low fixed rate comes to an end this has been eased somewhat by the fact that the central bank has cut the base rate twice since December, bringing the base rate down by 0.5% in the space of a few months.
It is also thought that there are further interest rates to come over the course of the year.
However, for those who are expecting their cheap fixed rate to come to an end imminently the problems may not be over, as many may find it difficult to get a decent remortgage due to the effects of the credit crunch.
At present many lenders are being increasingly cautious about the amount of business they take on and who they are prepared to lend to, and this could means that some of those coming off cheap fixed rates are stuck with crippling interest rates and repayments.
However, the news is not all bad, with the Council of Mortgage Lenders stating: “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.”
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