Negative Equity & LIBOR rate

emm1e_2

Firstly apologies if this has already been covered, I read quite a lot and didn't find anything.

My situation is that I have a house of my own, my partner also has a house that we tried to sell last year but just didn't have any luck. Since then we got a tenant in which has given some income, but not enough to cover the mortgage, but a help, and has allowed us to do more work on the property to hopefully make it easier to sell.
I'd like to keep the tenant in because the mortgage stands at around £110k and the house won't realistically sell for more than £90k (don't even get me started about how ridiculous this is - sadly all sorted before I was around to explain just how stupid this was) but the mortgage has just finished a fixed rate and started tracking the LIBOR....i've read up on the LIBOR and got totally confused. Do we have any indication of what this is expected to do in the next year or so?

I welcome any advice as I am really stuck with this one, obviously noone can tell me exactly what the LIBOR will do, but if it rises from the 0.61 it is at currently to even 2% the monthly repayments are likely to be around the £1000 mark which we just can't keep up.

Thanks

flammable999

what was your fixed rate? and what is your current rate? LIBOR +?%

Charterhouse

Libor is really only a theoretical rate these days but in theory it represents the price at which banks are prepared to lend money to one another on an unsecured basis. It is correlated to the UK Bank Base rate but is virtually always higher than base rate (especially in a rate hiking cycle). I would suggest that if you expect it to be between 0.25% and 0.50% higher than bank base rate you will not go too far wrong.

This does mean that if base rate gets above 1.5% this could be bad for you. Will they let you refix?

VIGILANT22

[QUOTE=emm1e

Is yr rate not libor+ a %?..who is the lender?

emm1e_2

i'm not exactly sure of the details as it's not my mortgage but i think its approx LIBOR +3%. The fixed was about 5% (due to bad credit and some daft decisions)

VIGILANT22

i would imagine this is with a sub prime company who is no longer offering new loans etc

flammable999

emm1e wrote: »

i'm not exactly sure of the details as it's not my mortgage but i think its approx LIBOR +3%. The fixed was about 5% (due to bad credit and some daft decisions)

Hmm that means the libor rate would have to increase from 0.5 to 2 for you to be worse off than your fixed. Like you said no-one can tell whats going to happen with the LIBOR rate so its hard to really plan ahead. I will be switching to LIBOR+2% from my fixed of 7.18 so libor would have to jump back up to 5% for me to be worse off but libor was over 6% when I began the mortgage in Oct 2008 so you just dont know. Remortgaging to a fixed, coming from a sub-prime lender may prove to be difficult too.