How To Survive Mortgage Payment Shock

One Million Borrowers At Risk Figures from the Financial Services Authority (FSA) suggest as many as one million “borrowers could be at risk of falling into arrears and are vulnerable to possible repossession of their homes. These are really frightening numbers.

Even just this week, a member of the Bank of England’s Monetary Policy Committee warned that borrowers, particularly those who are deemed a greater credit risk, may have no choice but to move onto their lender’s far more costly standard variable rate (SVR) once their fixed rate period ends.

Indeed, data from the FSA reveals borrowers in this position could be faced with a whopping ВЈ210 hike in monthly repayments on average by paying the SVR, which is the lender’s bog standard - and therefore most expensive - mortgage rate. But, amidst all this doom and gloom, the Council of Mortgage Lenders (CML) reckons payment shock may not be as bad as we first thought.

The CML estimates a borrower coming off a two-year fix and choosing a new tracker mortgage - where repayments vary in line with changes to the Bank of England base rate - will pay an extra ВЈ140 per month* if they re-mortgage during the first three months of the year. However, those moving their mortgage in the final three months of the year may experience a rise of just ВЈ39* if further base rate cuts”filter through to lower mortgage rates.