The knock-on effect of the US sub-prime mortgage crisis is beginning to cause some concern among UK homeowners. Not only are house prices falling, but mortgage prices are starting to rise amid what mortgage advisor John Charcol describes as a ‘credit crunch’.
This will affect those buying a property and remortgaging, as well as those looking ahead to the end of their current deal.
Borrowers who are remortgaging are being advised to take advantage of current discounts, as obtaining funds will be progressively more difficult for lenders over the next nine months and this will probably lead to smaller discount margins.
Company spokesperson Katie Tucker points out that: “Abbey has already declared that it will be increasing its tracker rates – as has Bank of Scotland this morning – and Standard Life have withdrawn their full range of trackers and not announced replacements.”
However, some companies are still offering competitive deals with discounts and no Early Repayment Charges (ERCs), which are ideal for borrowers who would like the option of remortgaging if fixed rates become more competitive in the next two years.
“For those wanting the security of a fix, there are some competitive deals on offer as the marginal drop in swap rates in the last two weeks has allowed the majority of mainstream lenders to re-price fixed rates below six per cent,” says Ms Tucker.
The Bank of England has explained why the era of cheap lending has to be stopped and says that it will not be bailing out banks that have invested in securities based on high-risk sub-prime mortgages.
"If risk continues to be under-priced, the next period of turmoil will be on an even bigger scale," warns Bank of England governor, Mervyn King.
The bank’s data for this week also reveals that standard variable mortgage rates hit a nine-year high in August – further bad news for householders.
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