Lenders have sent out a grim warning that they expect a sharp rise in repossessions in 2012, and this should act as a timely reminder for millions of homeowners to have secure mortgage arrangements in place ahead of what is expected to be a bumpy year in the financial markets.
There are currently around an estimated 166,000 mortgages that have arrears of 2.5% or more, and the CML, Council of Mortgage Lenders, fear that further rises in unemployment could cancel out the benefits that come with low rates and send the number of repossessions soaring up to 45,000, compared to 37,000 in 2011 and 36,000 in 2010.
While the Prime Minister David Cameron received plaudits for exercising his right to veto at the summit in Brussels, the fact the eurozone is possibly drifting towards a break up could make life even tougher for home buyers. In just a few months time mortgages could cost a significant amount more than they do now.
Ray Boulger, from mortgage brokers John Charcol has said that if the eurozone crisis comes to a head quickly the problems could be even worse and the cost of new borrowing shoot up due to discord across the banking system. He went onto say that the Brussels meeting and the subsequent admissions from other national leaders that it would be difficult to make the deal stick suggested the crisis was moving into its final stages.
There is immense pressure on the European banking system and banks are finding it harder than ever to raise money in the wholesale market, and due to this the costs of mortgages have already started to rise.
David Black is a banking expert from the financial data specialists Defaqto, and he said that in the past month the rates on selected products has already been raise by BM Solutions, the Halifax, Accord Mortgages, Mortgage Trust, ING Direct, Paragon, Northern Rock, Santander, Scottish Widows and Platform. Most of these changes, however, will affect new customers more than existing ones.
Ray Boulger added that due to the cost of new borrowing shooting up, the rates on many new short term fixed and tracker loans had risen by around 0.5% in the last few months, and some lenders have increased their rates 5 times, albeit in small amounts. He used a Woolwich loan as an example, where a 90% loan to value limit has risen by 0.9%.
The increases that have taken place so far haven’t been big enough to deter many who are still keen to buy, and historically, mortgage rates are still incredibly low, but this could all change in 2012. For months now, canny home buyers have dodged the storm by sitting tight with their standard variable rate mortgages when their fixed rate loans expired.
Boulger says that if your standard variable rate is sitting at less than 3% you may as well stay put. The problem is that many of the standard variable rate mortgages are in the bracket of 4.5-6%, one being the Northern Rock’s which stands at 4.79%. If this is the case with you, and you have between 15-25% of equity tied up in the property, you should check out other options.
After it peaked in 2007 at £363bn, gross mortgage lending then dropped like a stone and in 2010 was down to £136bn. The activity in remortgaging fell even further than mortgaging when it came to financing a purchase, but the gross lending figure for 2011 looks like being slightly up on the previous year at around £140bn.