Is this the return of the 100% mortgage?

On March 18, 2011, in News, by Lewis Alexander
  • free credit report UK from ExperianMuch maligned for its perceived part in the credit crunch, the 100% mortgage may make a return in the UK during 2011 as a matter of necessity to avoid plunging the UK banks into further swathing write-offs for bad debt.

A serious concern for the Monetary Policy Committee and leading economic advisors is that by raising interest rates in 2011 (arguably required to control inflation and encourage economic growth) it will plunge many customers currently in negative equity paying standard variable rate mortgage rates into a position whereby they can no longer afford their monthly repayments.

Such an impact is considered too great a risk to the economic recovery as large volumes of customers defaulting and banks suffering from reduced profits will undermine the fragile confidence in the banking system.  Therefore, the government owned banks (such as RBS, Lloyds TSB & NRAM) are rumoured to be ‘under significant pressure’ to review their lending policies for mortgages.

Essentially the choice offered is stark – either offer existing customers a reasonable rate on a fixed term or risk having to write off £millions more in bad debt as mortgage customers find it difficult to keep pace with rising standard variable rates as the MPC hikes interest rates, as expected, during 2011.

As recent market responses to bank results show, large provisions for bad debt do not help support high share prices so this is something that banks very much wish to avoid.

Put simply, if the banks don’t come up with decent deals, then there will be more people struggling to pay their mortgage payments and thus repossessions will increase and there will then be more people queuing at the door for social housing and less people from ‘Alarm Clock Britain’ focusing on the big society.

  • Still with us? We hope so!
  • So what does it mean for you and I?  Well not a lot if you bought your house before 2005 and haven’t taken any further loans secured against your house.
  • If however you bought at the top of the market or currently have a loan to value of 95% and more, then this may be of concern.  Worrying about being able to meet your mortgage commitments is not a good place to be in, and actually being in or having mortgage arrears is worse.

Failure to keep up repayments on a mortgage or any other debt secured on your home may result in you losing your home through repossession!

As debt management specialists, we may be in a position to help you change your current unsecured debt repayment arrangements to reduce the impact that an increase to your monthly mortgage repayments would bring.

Help is at hand and here at Lewis Alexander as we have personal debt specialists available to try and help you.  If you are in a position whereby your household finances are carefully balanced and any increase in your mortgage rate would cause a real difficulty then call us on FREE today using 0800 018 6868.

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