Sunday, Feb 08, 2009
Borrowers face a repayments crunch in the summer
Times: Your guide to 0% mortgages
Millions of tracker borrowers face a repayment shock of up to £7,000 a year, despite interest rates falling to a record low of 1% last week.
The jump in repayments will be most severe for the many thousands of borrowers whose deals track below Bank rate, some of whom are now paying 0% following the Bank of England’s half a percentage point cut last Thursday. They could see their monthly repayments leap by as much as eight times — from less than £100 to more than £600 on a £200,000 loan — when their deals expire. Most of these sub-Bank rate schemes were sold in summer 2007, so the repayment shock will hit home in just a few months’ time. Those on super-low rates need to be ready. Even the cheapest remortgage deals are at 3%.
Posted by mytimeisnigh @ 10:22 AM (1141 views) Add Comment
7 Comments
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1. titaniccaptain said...
I like this comment
"What a mess. Labour have totally destroyed this country. They are all beyond contempt. Those pathetic stooges at the Bank of Neglect should hang their heads in utter shame. Independent no way.
Ad, UK,"
2. paul said...
The thing about these 0% mortgages is that they were only really available when the hsouing market was reaching the last days of the credit boom, so the people holding them are the deepest in negative equity.
They may be paying 0% on their mortgage but they're still paying £800 a week(!) through capital depreciation.
3. plato said...
paul said "...........so the people holding them are the deepest in negative equity."
That's the reality of it. Anyone who thinks they are doing well out of very low interest rates is disillusioned. Your very wealth whether real or apparent as in property ownership is inexorably being eroded. When the time comes,and it will, interest rate hikes will provide the killer blow to those with negative equity and a further fall in property values as they have to be redeemed.
4. phdinbubbles said...
If anyone can't put money aside or overpay their mortgage in preparation (when they're only paying <£100 amonth) for the hike to just over £600 a month on a £200k mortgage they should be put in a debtors' prison. It might sound like a huge price hike if you describe it as x8 what the were paying before, but to still only pay just over £600 a month on a 200k mortgage is still ridiculously low.
5. p. doff said...
Isn't this a non-event. If you took out your 2 year deal tracker mortgage in 07, your initial rate would have been way above 3%. Ok, repayments would have gone down since then, but it is hardly an unmanageable shock (assuming you haven't remortgaged to the hilt) if your repayments reset to half the amount you originally budgeted for.
6. magnifico said...
I fully agree with you p.doff. I may add that the Government measures might, just might, temporarily slow down or even stop the HP slide.
I say temporarily as I believe they have a long way to go in the downward direction. It's enough to start bothering even stubborn bears like me though.
7. Sirmuttley said...
What a non story.
These mortgage owners knew their rate would go up when they took out the mortgage. As it will turn out the low interest rate means their new higher rate will be lower than they could have ever expected.
If they're making a killer saving on their 0% rate right now then it's not hard to either stick the extra cash they have in a savings account or over pay the mortgage.
As I said. Non story.