According to Mortgage Advice Bureau (MAB), it estimates that 178,800 people who took out mortgages in 2005 will face mortgage repayment increases of £185 a month as they come to the end of their fixed rate deals and move onto their lenders SVR rate this month – with a further increase should the base rate rise again this week.
On a typical £100,000 capital and interest repayment 25-year loan, the interest rate on people’s loans will increase from typical fixed rates of 4.39 per cent (Moneyfacts 2 June 2005) to the current average SVR rate of 7.40 per cent (Moneyfacts correct as of 24 May 2007). This means that monthly repayments will increase by £185 or 33 per cent from £556 to £741, and represents a total cost for all 178,800 people of £33.08 million per month.
However, should the base rate rise by a quarter point, Mortgage Advice Bureau estimate that monthly repayments will increase to £201 or 36 per cent from £556 to £757 and will increase further to £217 should the base rate rise to 6 per cent during the year as predicted by many city analysts.
Brian Murphy, head of lending at Mortgage Advice Bureau, commented: “The effects of four successive base rate rises will become really apparent to those whose fixed rate loans come to an end over the next few weeks. Their mortgage repayments will no longer follow the low fixed rates set in 2005 but instead revert to their lenders escalating SVR rate.
“With an increasing base rate, lenders have no option but to increase their SVR rates inline with the rises. However, for borrowers who do not monitor their mortgage payments carefully and for those who are now coming to the end of their fixed rates, the effect of these SVR rate rises on their mortgage repayments will begin to bite.
“Mortgage Advice Bureau actively contacts all of its customers when a fixed or benefit loan period ends, to reappraise their needs and advise on their mortgage options. However, many other people may not realise that their fixed rate has finished until they become aware of an increased direct debit from their bank account. Our advice to mortgage customers is to always monitor their mortgage payments carefully, and seek independent mortgage advice to research the options available to them from the entire market, especially with the unpredictable nature of the base rate at the moment.”
