Mortgage rate increase by 0.45%!!!!

dadsta

Dear All,
Unfortunately, I have a mortgage with a complany called Redstone. Two years ago they were the only ones who would entertain me. I had then a fixed rate of 6.800% for two years. I have tried to find out what will be my new payments as of 1st march 2009 as the fixed rate runs out 28th Feb 09.
They won't quote or estimate me any figures till at least the beginning of Feb.
I am presently unable to work due to mental illness caused by finances and other situations. All I want to know is a rough figure or way to work what the increase could be.
My fixed rate will change from 6.800% to a Liable plus Rate. Liable rate at the moment is 4.050% and plus factor is 3.200%, a new rate of 7.250%.
Our mortgage is £170,000 and we currently pay £971.88.
I have tried to get some work recently, but to no avail. I am not looking for sympathy. Is it worth selling, as I get no housing or council tax benefit.
Any help or direction would be appreciated.
Kind regards, David

maninthestreet

I think you mean 'LIBOR', not 'Liable'. You seem to have an 'interest only' mortgage, if you are paying £971.88 per month. At 7.25%, the interest for a £170,000 mortage is £1027.

SteveStone

Hi, i'm not sure if this is right but do you mean a Libor plus rate? If so i am in the same situattion as my fixed rate ends soons and my rate will be libor + 2.6%. My mortgage company sets their libor rate every 3 months and their next review is 1st March. You may find that if anything it may only affect you for the first month.

luckyfool

Have you looked into applying for Housing or other benefits? If not please speak to the CAB or something along those lines.

Your mortgage is linked to LIBOR, not Liable, from February. You can find current official LIBOR rates through https://www.swap-rates.com which pulls data from the FT website. LIBOR is set every day by the British Bankers Association at around midday and you get it for different currencies and different borrowing periods. i.e. It is supposed to reflect the average rates Banks are lending money to each other for set periods, e.g. Sterling Overnight LIBOR, 1 month, 3 month, 6 month etc. 3 Month Libor is what Banks are charging to lend each other Sterling for 3 months. Most mortgage rates linked to LIBOR are linked to this 3 month rate, but even then it's not that simple. It is set by the lender itself and reset every 3 months. e.g. Redstone may have reset at 4.05% on the 1st December, and will next reset it at 28th February I believe. They don't always set it at the 3 month Libor rate on that specific date, but calculate an average of the daily 3 month libor spot prices over the preceding 3 months, and set it at that level for the following period. While it is at 4.05% currently, I would guess that on the next reset it will come down to around 3 to 3.5% giving you a mortgage rate of 6.2% to 6.7% (this is purely a guesstimate). 3 Month Libor was around 2.7% before the rate cut yesterday, and was already down another 0.20% to 2.5% by the time yesterdays libor rates were announced. I wouldnt be surprised if 3 month Libor is down to 2.3% next week and there is a good chance that base rate (and probably Libor as well) will come down further in February.

Of course any changes in LIBOR might not effect your 1st payment on the variable rate as it can be a month or so until it is applied to your payments so you should plan on a 1st payment at least at around the level you have estimated.

Selling the property - If there is no prospect of you earning money to pay the mortgage and you cannot get assistance from Housing Benefit etc then I cannot see any alternative to selling the property or being repossessed. Its normally better to sell it yourself as you should get a higher price than at repossession, lower costs, and you would not destroy your credit rating in the same way that a repossession might.

luckyfool

Another quick point, if you can get back on your feet some of these lenders are willing to offer incentives for you to leave them, there are stories of 15%-30% reductions in the mortgage balances being offered for you to remortgage away to another lender. This is because if they are trying to raise cash by running down or selling their mortgage books off the only buyers for these types of mortgage 2nd hand are offering less than 50p in the pound for the debt.