Mortage costs to increase significantly!
Almost 1 million borrowers are going to see their mortgage rise by an average £630 of a month, as lenders are preparing to raise their rates next month, even though the bank base rate remains unchanged!
Borrowers who have their mortgage on standard variable rates are going to be hit by the increases, the increases have been announced by a brace of lenders which include the part state owned banks NatWest, Halifax and RBS. Already Since Oct last year, people looking for a new mortgage have found that 2 year fixed rate deals have gone up from 3.82% to 4.15 % today, this results in a £150,000 mortgage being £320 more expensive to service.
Banks are looking like they are becoming more aggressive with their lending costs, the problem with “standard variable rate” is that the borrower is at the mercy of the lender, the rate is not tied to the bank rate, so the lender can raise the interest rate it charges whenever it wants, even though the bank of england base rate remains unchanged! Many households are on the brink at the end of the month and many have nothing left at the end to save for those rainy days, some are even using their credit cards or a payday loan to pay their mortgage.
A safer mortgage option is a tracker mortgage as it tracks the bank base rate and only increases when the bank rate increases, but even these are not guaranteed, although a lot of economists expect the base rate to remain unchanged, people seem to forget the 90’s when in 1990 the bank of england base rate was an eye watering 14.88%!!!! even in 2007 it was 5.75%. The only true way to be sure your mortgage rate won’t increase is to get a fixed rate deal, where you fix the price for a set amount of time, and no matter what happens around you in the world of finance, your monthly payments will not change until the end of the deal.
The Council of Mortgage Lenders said the cost of raising mortgages on the wholesale market had increased since 2011 and forecast 45,000 homes will be repossessed this year, compared with 36,200 in 2011.
The material on this website does not constitute advice and you should not rely on any material in this website to make (or refrain from making) any decision or take (or refrain from making) any action. It is just the opinion of the author