Remortgaging now could avoid future mortgage debt
Released
on: December 12, 2008, 10:59 am
Press Release Author: Melanie
Taylor
Industry:
Real
Estate
Press
Release Summary: Financial solutions company Think Money have
said that remortgaging in the near future could help homeowners
to reduce their outgoings and avoid falling into mortgage arrears
– an increasing problem for British households – and
added that mortgage rates could become even lower if the Bank
of England lower the base rate further, as predicted.
Press
Release Body: Financial solutions company Think
Money have advised existing homeowners that now is
a good time to remortgage,
following the recent Bank of England base rate cut to 2% that
has prompted some mortgage lenders to act more competitively with
regard to mortgage rates.
They
added that there is a strong possibility that the base rate may
be cut even further in the coming months – with economists
predicting a base rate as low as 0% – meaning tracker mortgages
may become a particularly attractive option to homeowners as interest
rates fall further.
The
Bank of England’s base rate cuts in October and November
led to several lenders passing on the full cuts to their variable-rate
mortgages. Combined with the September’s base rate cut of
0.5%, that represents savings of £255 per month (£3060
per year) on a typical £150,000 repayment mortgage.
Tracker
mortgages, by default, benefited from the base rate cut –
and should economists’ predictions of further base rate
cuts be true, these homeowners should stand to benefit from even
lower mortgage
repayments.
A
spokesperson for Think
Money said: “Existing homeowners could
potentially save a lot of money if they remortgage
now – and they will be even more pleased to hear that interest
rates may fall even further in the coming months.
“Two
years ago, typical mortgage rates were around the 6% mark - now
we are looking at closer to 4.5% or 5%. A 1.5% fall may not look
like a lot on paper, but it represents substantial savings on
monthly mortgage payments.
“However,
it’s important to take into account the costs of remortgaging
– the mortgage arrangement fee, for example – as well
as the more limited availability of mortgages
and the higher loan-to-value ratio required by a lot of lenders.”
The
spokesperson added that while fixed-rate mortgages
have seen no widespread interest rate cuts so far, further base
rate cuts may encourage lenders to consider their rates.
“Since
fixed-rate mortgages represent a long-term decision, lenders have
been even more reluctant to commit to lower rates. Nobody can
be certain that rates are going to continue to go down, especially
when they are as low as they currently are. However, a base rate
cut to 1% or 2% might convince more lenders to set more competitive
fixed rates on their mortgages.”
Mortgage
debt has become an increasing problem amongst homeowners in the
midst of the economic crisis, with the Council of Mortgage Lenders
estimating that around 45,000 homes will be repossessed in the
UK this year, compared with 27,100 last year.
A
debt expert for Think
Money commented: “The rapid rise in costs
of living over the past year has led to a lot of people trying
to balance their financial commitments, and in some cases that
leads to mortgage arrears.
“It’s
especially an issue with people who were offered 100% and 125%
mortgages, since their mortgage repayments are higher compared
with homeowners who put down a deposit on similarly priced homes.
“The
most important thing for homeowners to do if they find themselves
falling behind on mortgage payments is to contact their mortgage
lenders – it may be that they can come to an alternative
agreement, or some kind of payment holiday, in order to allow
them to get back on track.
“If
the mortgage debt is more serious than that, it may be time to
seek professional debt advice. There are a number of debt solutions,
such as debt consolidation and debt management plans, that can
reduce monthly outgoings – which could be crucial for homeowners
who are struggling to meet their commitments.
“As
with anything debt-related, if you are looking to do something
about your mortgage arrears, it’s always wise to seek professional
debt advice beforehand.”
##
Resources for editors:
Homepage:
http://www.thinkmoney.com/
Remortgage page: http://www.thinkmoney.com/mortgage/remortgage/
Mortgage page: http://www.thinkmoney.com/mortgage/
Web
Site: http://www.thinkmoney.com/mortgage/remortgage/
Contact
Details: Melanie.Taylor@thinkmoney.com
Pennington House,
Carolina Way,
South Langworthy Road,
Salford Quays M50 2ZY
United Kingdom