Mortgage Interest Rise AGAIN !!! Advice Needed Please.

van22663

Please can anyone offer any advice. I have a mortgage with kensington. Initially I was on a discounted rate for one year but I cannot keep up with their increases. I know they follow a different rate to the bank of england, but no one seems to be able to explain the constant rises.
I have a mortgage for approx £116,000 on interest only and I have the details of the rises. Please can anyone advicse me on whether this appears to be normal

1st June 2006. Rate 5.15%. Monthly payment £493.19
1st September 2006. Rate 5.50%. Monthly payment £529.03
1st December 2006. Rate 5.75%. Monthly payment £553.28
1st March 2007. Rate 6.05%. Monthly payment £584.44
1st May 2007. Rate 7.80% (end of one year discount rate )Monthly £754.59
1st June 2007. Rate 8.10% . Monthly payment £787.51
1st September 2007. 8.90%. Monthly payment £871.79


As you can see, the rise is pretty dramatic, does this look normal to anyone out there. I have fallen behind a couple of times, not missed payments completely but paid less than I had to, agreed with the mortgage company, but i have had a few £50 charges added to my mortgage.

Mortgage about £116900 at present.
ANY advice would be appreciated.
I am looking to come away from Kensington albeit with a high early repayment charge, but I cannot keep on top of these increases.

Thanks.

gemma.zhang

1st May 2007. Rate 7.80% (end of one year discount rate )Monthly £754.59

When it comes to the end of your discount rate, you REALLY SHOULD REMORTGAGE - take another product, something like fixed-rate, or discount tracker, etc, to make your payment more affordable !! ..

It's normal that they will switch back to Standard Variable Rate, which is normally 1-2% above BoE Base Rate.

Will suggest you talk to a broker, to get it sorted ASAP before it's too late.

Good Luck.

ukbondraider

The rises are due to the lack of liquidity in the financial markets i.e it is costing Kensington more to borrow the money to provide you with your mortgage. They therefore increase their rates as a result. Dont know if the rises you describe are normal but we are not currently in a normal environment where credit is concerned.

You must have known that after your one yr discounted rate that your mortgage would rise significantly (at least 50%). Thats why people fix their rates for longer or remortgage to another fixed rate/discounted rate. I am assuming that you are unable to remortgage which probably means you dont have a choice but to pay.

Kensington are reknown for being one of the sub-prime equivalent lenders here in the UK so they are going to charge alot more.

If you can remortgage elsewhere then do so. Just try and get away from Kensington.

sammyjammy

I really feel for you, your mortgage is linked to the LIBOR rate which is the rate at which the banks lend to each other, up until recently the two rates (LIBOR and Bank of England Base Rate) were the same but since the sub prime mortgage issues in America there have been major changes, I would imagine that the changes whilst you were in your discount rate where in line with LIBOR changes but since you've come out of that rate I suspect Kensington can amend and change the rate at their whim.

How much is your ERC? What you need to do is work out if its worth it but at that rate i suspect it will be, do you think you will be able to get a high street mortgage?

Sam

PasturesNew

Yes, without actually calculating each month, it looks normal to me because you came out of your discounted period at a time when the BoE were increasing rates. Each company will increase their rates at slightly different times to the BoE announcements.

The only "concerns" I would have over your postings are:
1] your mortgage is interest only, which means you might not have enough equity in it to get a mortgage with another company at a cheaper rate
2] even if you have enough equity, what would the multiple of your salary that company would allow and would it be enough
3] mortgage arrangement fees have shot up, so it might cost you £1000+ just to change mortgages.

Go see an IFA and see if they can cut you a better deal.

Good luck

NSR2

van22663 wrote: »

Please can anyone offer any advice. I have a mortgage with kensington. Initially I was on a discounted rate for one year but I cannot keep up with their increases. I know they follow a different rate to the bank of england, but no one seems to be able to explain the constant rises.

I'm afraid it's the credit crunch.
I posted something here which may help you to understand why your IR is going up: http://forums.moneysavingexpert.com/showthread.html?t=534283&page=3

It's down a few posts there. Of course the usual "you're getting this information from some guy on a website, who maybe getting it wrong" warning applies


Now it seems to me that if you are in a situation where you can't afford the increases then you must do something. So it's worth making a list of possible actions you can take:

1)Sell your house
2)Re-mortgage with Kensington
3)Re-mortgage with a different provider.
4)Decrease your expenditure in other areas
5)Increase your income

If I were you I would do 3,4,5 until you are out of trouble,
There are loads of price comparison websites you can use to find another mortgage provider. Look into re-mortgaging and work out the cost.

You can save money quite easily. Pretend you have loads of credit card debits and follow the debt free wannabe advice, they know how to save loads of cash

In terms of extra income, you can sell stuff on Ebay, etc this is useful only to get some money for a one off fee. Again the debt free wannabe people know what to do here.

I think the best thing to do to get extra income, is to let out a spare bedroom if you have one, I think you can get over £4,000 per year tax free, you can look for someone to house share on the https://www.gumtree.com website for free.

Of course it means letting a stranger in, but if it saves our house, it's worth it!

Stargazer_Lily

Having had a look at Kensington's website and the market they supply finance to, coupled with the fact that you have made incomplete payments in the past, I would worry that you are going to find it difficult to find another lender.

If you are having trouble making the payments now I would get proper financial advice as soon as possible. It may be that a good broker could get you a better deal than Kensington are offering you, but it's very important that you try to minimise the damage being done to your credit history so that you can get the best rate possible.

The Debt Free Wannabe board has some regulars who are able to offer fantastic advice about reducing your outgoings and can find ways to squeeze pennies from everywhere. That way you may be able to ensure that you can make complete mortgage payments and prevent you getting further into trouble.

Lil

Griptool

Kensington is a Sub prime lender, the recent increase in rates is due to the re-pricing of risk in the credit market (cost to insure against loans likely to default).

As you can tell from your increase in your monthly repayments this situation is a negative feedback loop, borrowers default = rising costs passed on to borrowers = more borrowers default etc etc.

If you are not able to refinance the loan at an affordable rate you may want to consider selling the house to settle the debt and realise any equity you may have in the property.

Please consider, an interest only mortgage (with no repayment vehicle) is renting the house from the bank.

Good luck

KTF

Unless you can recover the costs of the ERC by moving lenders I think there is little point remortgaging. How much longer are you tied to them for?

Conrad

IMPORTANT - Have you considered going for compensation? The FSA set up statutory legislation to enable this via the FOS. You dont need any third party help, just complain first to the broker (use speical delivery recorded post), then if he refuses to pay compensation go to the FSA.

YOUR COMPLAINT:

Dear broker, I cannot afford my mortgage payments given the rate rises, I wonder therefore why you did not recommend a fixed rate? Kensington had a range of fixed rate options at the time of application.

You were aware I was on a tight budget.
As an adviser the onus is on you to recommend the most suitable product given my circumstances. With this in mind surely a 3 year fixed rate would have been better.

I seek full compensation to included all loses such as the Early Repayment Charge, legal fees, new lender fees and such like I will now incur as a result of having to remortgage.

You were in a position of trust and best placed to advise me what mortgage was most appropriate given ALL of mind needs.

Where you supply copies of papers I have signed these will be checked to ensure the original signatures were genuine in all respects.

Please reply within 7days.
I will be taking this up with the FSA and FOS unless a satisfactory outcome is achieved.


.............

Rememeber poster, the onus is on the broker - you are just a lay person. He may have had you sign something which indicated you wanted a variable rate, but this you can argue is because he didnt give a fixed rate option.
Some brokers I have known will forge signatures and photocopy a genuine signature onto another document so be on guard.

van22663

Many thanks to all who replied.
My situation has changed since i took out the original mortgage, I split up with my husband, hence the mortgage is less affordable now. I am tied in with kensington for another 18 months. I can come away from them, but with a £7000 early repayment fee. I have heard that the LIBOR rate has come down, but whether Kensington will reduce my rate is another matter.
I am already doing everything to earn extra income, selling on Ebay, mystery shopping, extra hours at work, Avon. I cannot do much more without my 2 children suffering. I just work till 3pm most days so that I dont have to use child care.
As pointed out, I am more concerned with the lack of other lenders available to me because of my situation. Selling the house is a last resort, hopefully it wont come to that.
Thanks once again everyone. Guess who wont be having a variable rate again !