Mortgage advice

kiwi7_2

A colleague of mine is in the following position:
Bought flat in Sept 08 100% mortgage, flats in area have dropped approx 20% in price- had 2 yr SVR Mortgage comes to end in September. Limted savings.

With mortgage coming up for renewal what would be the best advice I could give in the current conditions?

Any help greatly appreciated.

getmore4less

they do not have to renew, just let it run onto the follow on rate.

That will probably be their only option anyway unless the current lender will do a deal.

Robert_Sterling_3

The market is a bit flat at the moment.
Your friend will have to go onto the SVR and wait and hope for a high rise in prices soon.

herbiesjp

JUst need to be clear here:

1) If they bought September 08 on a two year deal it will expire September 2010 (unless had a fixed expire date) - so need to worry yet

2) 2 year SVR mortgage? SVR has no timescale on it - was it a discounted rate of some sort?

kiwi7_2

sorry I meant sept 2007

Martinslovechild

Your friend will automatically move onto the lender's SVR at the end of the discount period.

I'm only aware of Halifax who has inserted a clause in some of its mortgage products which requires borrowers to make additional overpayments to reduce their mortgage balance to an amount lower than the value of the property, i.e. to erode any negative equity, however this is like chasing rainbows - as house prices are dropping between 1% and 2% on average each month, additional payments in £thousands are likely to be required making an enforcement of this clause extremely unlikely as most people don't have access to £4,000 on top of their regular monthly payment (assuming a mortgage of £200K).

It's likely that if your friend is in a negative equity position, they won't be able to move their mortgage elsewhere until such a time as the amount being borrowed is 95% or less of the value of the property.