End Of Mortgage Deals Could Mean Huge Hikes For Homeowners
A recent report has shown how many homeowners in the UK are set to be faced with crippling rises in their mortgage repayments as a result of their special mortgage deals, such as cheap fixed rate loans, coming to an end.
Once the mortgage deal expires, homeowners will either have to remortgage to find a more affordable deal or will have to move on to their lender’s standard variable rate (SVR). The SVR can be very expensive, but on the other hand finding an affordable mortgage elsewhere is becoming increasingly difficult.
Even if homeowners do find another mortgage deal to switch to, they will most likely have to pay expensive mortgage arrangement fees, which can run into thousands of pounds in some cases. Almost a million homeowners are expected to face mortgage repayment hikes of up to 40% if they have to switch to their lender’s SVR, and those set to be affected included younger homeowners who purchased their homes within the past couple of years and those that took out 100% mortgages.
One broker said that the situation was very difficult, stating: ‘In the old days, competitive mortgage rates were typically available to anybody with more than five% equity. Now to get the best rates you need 25% or more.’ Another said: ‘There is a growing number of borrowers for whom there is little choice. They will simply have to pay more.’
However, one official said that some may prefer to switch to their lender’s SVR, stating: ‘The advantage of the SVR is that there is no fee to pay - and with some fixed and discounted deals coming with fees of about £1,000 or more, it is easy to see why some borrowers prefer their lender’s SVR for now. The idea is that once a competitive fix or discount becomes available the borrower can then move on to that without paying a penalty or having to give any notice.’
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