Claer Barrett offers advice on locking in fixed rate mortgages
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With skyrocketing house prices, near-record inflation, unaffordable energy prices and higher interest rates, some homeowners could find themselves in a difficult position this winter as experts predict repossessions could double as 2022 comes to an end. The risk of homeowners falling into arrears and potentially losing their home grows as the toxic economic situation across the UK gets worse.
Experts from We Buy Any House have warned house repossessions could double due to rising borrowing rates, which have risen due to the Bank of England’s incremental interest rate rises over the course of the year so far.
They told Express.co.uk: “As the Bank of England is trying to fight inflation by increasing interest rates with the standard mortgage rate (SMR) rising from 4.74 percent to 5.24 percent and the base mortgage rate (BMR) from 3.25 percent to 3.75 percent, we now fear that house repossessions could double as we are heading towards the end of 2022.
“What’s more, with the recent news of a key two-year fixed mortgage rate surpassing four percent for the first time since 2013, households in the UK are likely to struggle and could go into arrears on their mortgage repayments.
“Moreover, considering the consistent growth in house prices as well as the lack of government support for homeowners, repossession numbers are likely to see a significant spike in the following months.”
Those on fixed-term mortgages who managed to secure the record low interest rates of the coronavirus pandemic are safe until their term runs out.
But for those with tracker or standard variable rate mortgages won’t be so lucky.
The numbers are stark, with the average mortgage predicted to rise by £2,160 per year.
Karen Noye, mortgage expert at Quilter, told Express.co.uk: “Someone who took out a mortgage worth £250,000 over 25 years at around one percent would pay roughly £942 per month.
“After the latest rise to 1.75 percent someone borrowing the same amount but at 1.75 percent would pay £1,029 per month.
“What’s more is that if interest rates continue to climb to 2.5 percent, monthly payments would soar to £1,121, a nearly £180 difference.
“This kind of pressure would certainly force someone to live their life differently to meet the new costs.
“Quilter analysis of the number of mortgage repossessions per year when compared to the Bank of England base rate shows that changes to interest rates can correlate with the number of repossessions that take place in a year.
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“As interest rates climb we may well see repossessions climb with them as people struggle to make ends meet and sadly lose their house as they fall into arrears.”
House prices could also drop as the economic crisis unfolds, meaning some homeowners could be paying the bank more than the house is worth.
Prices have already dropped for the first time in a year, by a modest 0.1 percent in July.
Ms Noye continues: ”This could have a material impact on house prices as once these repossessed houses are put back on the market by lenders it would naturally push prices down as it becomes a buyer’s market where there is more stock than demand.”
Alex Kemp, partner at Ideal Mortgage Advisers, has offered some sage advice for Express.co.uk readers who may be struggling with their mortgage.
He told Express.co.uk: “Quite often we see that customers will be on the standard variable rate with their lender and haven’t changed to a new rate as they feel that due to their current circumstances such as losing their job, or a reduction in their income that they wouldn’t qualify for a mortgage or a new deal.
“Every lender will always offer their existing customers a new product once their existing rate is up for renewal as long as they do not wish to change the amount borrowed, the term, or the repayment type.”
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