Whats going to happen to those who cant remortgage??

missk_ensington

Hi everyone,

Ive been reading in the papers and on tv that lenders have withdrawn hundreds of products and barely any applications are being approved etc etc, so what is going to happen to the people whos fixed rates are coming to an end and can't get approval for a remortgage with anyone????

When my fixed rate ends in June I can remortgage, but if thats not possible my current lender will continue to lend, but at about 8% which onbviosuly isnt sustainable for more than a few months. Now I'm not too worried as I have a lot of equity and a perfect credit history, but what about those people with little equity who were lucky to get a mortgage the last time round and only got one cos lenders were handing them out like sweets?

What are the implications of this on a larger scale, are we about to see loads of people trying to sell up or will some business somewhere see an opportunity to become a key lending institution and come in with great offers to push the other lenders out of the market?

And finally, does these market conditions mean the end is nigh for brokers if there are no products out there to sell? Im currently doing CeMap but these reports are worrying me a little!

Dick_here

People will go onto the SVR with their current lender, which was what they signed up to when they took the fixed-rate out.

missk_ensington

SVR? Is that the rate that comes into play after the fixed rate comes out? (Sorry not got that far with my CeMap yet).

Surely most people cant afford to do that, I know I couldnt as it'd mean jumping from 5.54% to 8% which is a hell of a lot more

LittleMissAspie

Why would anyone take out a loan on which they can't afford the standard interest rate?

missk_ensington

Because most people know they'll remortgage for a new deal when the4 old one comes to an end

DaiJoA

missk_ensington wrote: »

SVR? Is that the rate that comes into play after the fixed rate comes out? (Sorry not got that far with my CeMap yet).

Surely most people cant afford to do that, I know I couldnt as it'd mean jumping from 5.54% to 8% which is a hell of a lot more

Yes it is, and you do get quoted the rate you'd have to pay at the end of the fixed rate, example with us our fixed rate NR mortgage is £809 now, and the price quoted for thereafter was £869. However, that £869 was based on interest rates in 2006, since then the interest rates for NR have shot up - we were quoted it would be £1100 pcm NOW, nevermind in three years time. So that's why so many people, like us, have been caught out and are in a hole. We've decided to cut and run and take our equity - around 10k after paying NR off - and go back to rented. Otherwise we run the risk of losing everything if we wait three years. So that's the situation for most of these first time buyers who were handed NR and other mortgages like sweeties. Selling and renting, or sticking and risking.

Dan_Collins_2

LittleMissAspie wrote: »

Why would anyone take out a loan on which they can't afford the standard interest rate?

Well this is why we are in the mess we are now. To much borrowing!

missk_ensington

Yeah but DaiJoa what if you're not able to sell, or not able to sell for the price you need?

Dick_here

missk_ensington wrote: »

Surely most people cant afford to do that, I know I couldnt as it'd mean jumping from 5.54% to 8% which is a hell of a lot more

Cut out all non-essentials. Pay the mortgage first, simple as that.

missk_ensington

!!!!!!_here wrote: »

Cut out all non-essentials. Pay the mortgage first, simple as that.

Of course, but for some people there are other essentials like credit card repayments, loan repayments, car repayments, petrol, gas/elec, council tax, food...just the basics that cant be avoided may well exhaust a lot of peoples income before youve even started on school uniforms, car MOT, car tax...

The crux of this is that people could probably shoulder the burden of an extra £200-300 a month on their mortgage if rates went up of whatever, but now that gas may be an extra £35 a month, electric an extra £25 a month, food an extra £100 a month, petrol an extra £_____ a month (for me my petrol has gone up by £120 a month since this time last year). Some people with bigger families and bigger homes may have their basic costs increased even more

beecher

missk_ensington wrote: »

Yeah but DaiJoa what if you're not able to sell, or not able to sell for the price you need?

That's the whole problem isn't it? Ultimately you'd be repossessed if you can't pay the SVR rate and can't sell - this is going to be the reality for many many people in the months to come, particularly as those who can't remortgage are the ones with poor credit ratings and/or high LTV.

House prices are going down, and I wouldn't be suprised if they go down a lot. As a country we're going to have to stop spending on non essentials, and move back to what is 'norm' - ie saving up for purchases, and differentiating between what we want and what we need.