Thrifty Loans

Some home owners on fixed rate mortgages could find themselves suddenly hit by an increase of 60% in their monthly repayments. This could bring some to the brink of crippling debt and repossession. Two million home owners are expected to come off cheap fixed rate deals in the next 18 months, and they will all be facing higher payments even if they can secure another fixed rate deal.

The big concern is for those who in the period of their current fixed rate deal have faced a County Court Judgment for an unpaid debt, or have got a black mark on their credit record or even if they have missed a payment on their mobile phone bill. These people will suffer from the tightening of lending criteria which has followed the credit crunch with its roots in the American sub-prime crisis.

Those who cannot secure a good deal may be forced onto the lender’s standard variable rate, which could be around 2.5% higher than the rate they are currently paying. Those with poor credit records may be forced onto even higher rates.

For a £125,000 fixed rate mortgage with £600 repayments, payments could rise for some in difficult circumstances to around £960.

Moneygate can foresee the problem; director Dennis Reed, said: “The mortgage market is changing by the day. As lenders look to tighten their terms a person could be labelled a bad credit risk and sub-prime just because of a small financial error in their past. The knock- on effect of that re-classification is very significant. A mainstream mortgage payer being shunted into the sub-prime market could face crippling interest charges of up to 2.5% higher than average. People applying for mortgages will also need to be much more accurate about the information they give. For example, a county court judgment that in the past was not considered crucial, could now mean the difference of being reclassified as sub-prime when they come to re-mortgage. A lot of people are in for a shock.”

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