Wages would have to rise by £2,000 a year to maintain the status quo
A typical homeowner with a £150,000 mortgage would need to see their wages increase by at least £2,000 a year in order to find the extra cash needed to take out a replacement fixed-rate or discounted mortgage deal, according to Expert debt solutions firm Newtomorrow.com.
A quarter of a million UK homeowners will see their two-year fixed-rate mortgages end in the next three months and will find themselves paying at least £100 a month more for a new fixed-rate deal after a sequence of rate rises this year pushed up the cost of borrowing.
In October 2005 the average interest rate on a fixed-rate mortgage was 4.96% – according to figures from the Council of Mortgage Lenders – or around £885 a month on a £150,000 mortgage.
Many current fixed-rate deals are around 5.79% which is around £996 a month – an increase of more than £100. Borrowers with £250,000 and £60,000 mortgages could see rises of around £189 and £40 respectively – significantly more if homeowners revert to lenders’ standard variable rates.
However, with the recent turmoil in the financial world, and inflation running at 1.8% – below the Bank of England’s 2% target – many analysts are predicting that interest rates may be cut later this year.
John Hall, chief executive of Best debt solutions firm Newtomorrow.com, said: “Several rises in interest rates over the last year have made all mortgages more expensive, and anyone coming off fixed-rate or discounted deals in the next few months will have to find extra cash. Anyone struggling to pay their other debts as a result of these mortgage rises and facing serious financial problems should seek professional & expert debt advice at an early stage.
“The recent troubles with Northern Rock and the subsequent credit squeeze may be a double edged sword. It looks as if another rate rise has been averted and that the next rate movement may actually be downwards. We are already seeing some better fixed-rate deals appearing. However, those who have poor credit histories may find it almost impossible to get a new mortgage deal at all as banks shirk from high-risk debt and raise interest rates further on sub-prime deals.”
The average fixed-rate mortgage in October 2005 was 4.96% with 142,600 mortgages taken out – accounting for 75% of deals. Fixed-rate mortgages currently account for around 79% of all new loans taken out.
ENDS
Issued by The BIG Partnership on behalf of Newtomorrow.com. For more information contact:
Bryan Garvie The BIG Partnership 0141 333 9585
bryan.garvie@bigpartnership.co.uk 07863 208045
Stuart Forsyth The BIG Partnership 0141 333 9585
stuart.forsyth@bigpartnership.co.uk 07766 477 858
Notes to Editor
• Newtomorrow.com is a company which specialises in consumer debt, focusing on Expert debt solutions tailored to the circumstances of each individual. Newtomorrow.com is part of the Invocas Group. www.invocas.com and www.newtomorrow.com
• Invocas Group plc is one of the UK’s leading debt solutions companies and the market leader in Protected Trust Deeds in Scotland, with a market share of more than 18 per cent. The corporate arm of Invocas is currently enjoying strong growth. Invocas floated on the Alternative Investment Market in March 2006.
• Calculations made using BBC mortgage calculator based on capital amounts of £250,000; £150,000 and £60,000 over 25 years for 2005 figures and 23 years for 2007 figures. The first few years of mortgage repayments are largely interest payments with only a small reduction in capital borrowing. All figures are estimates and are for illustrative purposes only. The interest rates used are examples only and will vary according to lender and individual circumstances.
• Council of Mortgage Lenders – www.cml.org.uk ====================================================[ END ]====