Monday, May 28, 2007
Category:
Consolidation
The last base rate rise has left a quarter of mortgage holders struggling with repayments or having to sell or remortgage.
According to price comparison site, Moneysupermarket.com, millions of homeowners will be forced to remortgage if rates increase once more. This could lead to more than seven million people being pushed into remortgaging as a rate rise would lead to payments increasing by up to £100 per month.
According to new research from moneysupermarket.com, 2.6 million Brits say they will have to remortgage if their payments rose by up to £50 per month, if the mortgage repayments increased by up to £150 per month, only 12 per cent of borrowers would be prepared, with half of all homeowners being forced to find a better deal.
Louise Cuming, head of mortgages at moneysupermarket.com, said: “The looming rate rise is of grave concern. We feel it could even be a half per cent rise which, according to the survey results will drive an alarming number of people into financial difficulty. Homeowners on a £150,000 interest-only tracker mortgage face additional costs of £750 per year, or £62.50 per month, for every half per cent that interest rates rise.
Just over half of people with a mortgage were affected by the last base rate rise in January. Of those affected, 15% are only just coping financially with their current lifestyle and a further 9% are struggling so much that they are already making sacrifices. 1% of homeowners have had to sell or remortgage their home.
Louise Cuming added: “It is alarming that people are still not budgeting for the increased mortgage repayments a further rate rise will bring. With so many saying they will be forced to remortgage if their monthly payments increase it is staggering more borrowers have not yet factored this in. Even more worrying is that people who are relying on being able to remortgage if their repayments rise may not be able to afford to do so due to the early redemption charges in place on many products. These people need to review their finances and budgeting immediately.”
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Homeowners who are planning to remortgage their property as a result of base rate rises could consider a secured loan as an alternative. A secured loan could be used to rearrange existing credit in the form of credit cards, store cards and any existing personal loans. This could potentially lower monthly repayments freeing up a little extra for rising mortgage repayments. By putting all existing debt into one place with a secured debt consolidation loan, homeowners will know the exact day and amount repayment will be taken from their account each month. If considering a secured loan to consolidate debt, it is however important to remember that repaying borrowing over a longer term will increase overall interest charges.
