Mortgage customers face £300 million bill

Which? estimates consumers will face an additional £300 million in mortgage repayments over the next year.

Related topics:  Mortgages
Millie Dyson
1st May 2012
Mortgages
New research from Which? reveals 70% of mortgage-holders are concerned about an increase in interest rates.  14% say they are already struggling with repayments. The greatest impact of these latest rises will be felt by ‘mortgage prisoners' who are unable to move to another provider.

Three quarters of mortgage-holders told us that they would be affected if their repayments increased by £50 a month, with 41% saying they would need to cut back on regular spending, 20% would need to reducing savings and 11% would not have enough for essentials.

An increase of £100 a month would see 20% of mortgage-holders not having enough for daily essentials like food and 11% being unable to pay their mortgage. Consumers also highlighted the emotional impact of increases in mortgage repayments, describing them as "devastating" and "a disaster".  

Which? chief executive, Peter Vicary-Smith said:

"Our advice to anyone struggling with their mortgage repayments is speak to your lender straight away.  It is encouraging that a third of people we spoke to had approached their lender but worryingly in one in five cases, they said their lenders offered no help at all. This is just not good enough and we want to see banks do more to help their customers who are struggling.

"These SVR rises are the consequence of the lack of competition in the market and the failure of the Government to take action to promote competition. This is why the new financial regulator, the FCA, needs to be a watchdog not a lapdog. It must stand up for consumers and stand up to the banks."

Which? wants lenders and the Financial Services Authority to do more to protect consumers against unjustified interest rate rises and ensure that consumers are offered the ability to fix their payments at a reasonable level. Lenders must not be allowed to take advantage of borrowers who are unable to move lender.

Ben Thompson, MD Legal and General Mortgage Club comments on the prospect of  increased SVRs:

"We have seen a few Standard Variable Rates  rise recently. In some cases this has been where a lender had an SVR that was previously comparatively low against other lenders, or from lenders who were looking to recoup some margin lost due to the rising costs of funding. Although funding had eased a bit through 2011,we have seen this become more pressured since last Autumn, reflecting continuing nervousness about uncertainty in the Eurozone.
 
"With more than 8 million of the total 11 million or so UK mortgage borrowers currently on a floating rate of some description, the question is how many more borrowers will be affected in this way and which lenders will make similar moves?
 
"Firstly the mortgage terms and conditions will have to allow a lender to move SVR if it wants to. Some for example cited "exceptional market circumstances" as a means by which to justify a rise in rate.

"However, most lenders don't have equivalent flexibility, and if they had they would no doubt by now have pulled the trigger, as it were. So whilst there may be a few more moves in the pipeline, we don't expect a landslide of SVR changes to follow.
 
"Many are perplexed that SVRs can rise without any change to Bank Base Rate, which remains stuck at 0.5%, and has been for over three years. However it is the wider cost of funding that has forced change.
 
"Although nobody wants their mortgage rates to rise, today's rates have to be seen in the context of historical levels, and they are very low indeed by comparison. It is almost certain that we have now seen the cheapest mortgage rates in a lifetime and that rates bottomed some time ago.

"Our advice would be to talk with your existing lender to explore any new options that you might have, but certainly do talk to an independent intermediary who will provide you with a wider market perspective and all round choice."
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