The sub-prime mortgage crisis in the US means people applying for Individual Voluntary Arrangements could be suffering longer, says Andy Davie, site manager for IVA.co.uk.
IVA.co.uk is a site that offers information and advice about Individual Voluntary Arrangements, and Mr Davie makes his comments just a week after the sub-prime mortgage market in the US hit crisis point, with thousands of homes being repossessed and some US lenders going under as they struggled to cope with so many customers who couldn’t afford their repayments.
As a result of the situation in the US, UK sub-prime lenders have hiked their prices and rates so that they are not caught out in the same way, forcing many people into paying extortionate prices just to get a mortgage, and Mr Davie says this could lead to many people in IVAs suffering financial problems for far longer than they should.
"We at IVA.co.uk are worried to hear reports of the growing number of people being forced into the sub-prime market for loans and mortgages," he said.
"Sub-prime lenders specialise in offering mortgages to people with poor credit ratings at very high interest rates and this will particularly apply to those undergoing IVAs.
"A condition of the majority of IVAs is that holders are expected to release around 85% of the equity in their property through a remortgage in the fourth year of their IVA.
"With sub-prime mortgage providers tightening criteria and increasing interest rates to unfeasible levels, those in an IVA will suffer the financial hangover of their remortgage far beyond the terms of their initial IVA contract."
Get IVA Advice
and find out more about bad credit mortgages