Clock Ticking For Low Interest Rate Time Bomb

May 13, 2010 - PRLog -- According to statistics released from the CML today, the number of repossessions was 9,800, down from 10,600 in the previous quarter and 13,200 in the first quarter of 2009. Also there was a reported reduction in the overall arrears numbers.

However, mortgage experts fear that low interest rates may be masking a future problem and artificially making mortgages more affordable for beleaguered borrowers.

During the boom times many mortgages were granted from specialist lenders with cheap fixed rates for a limited period to borrowers with a poor credit history or were self employed. The rates after the fixed period were very high, although recently they have been forced down by low interest rates.

Experts argue that these kinds of mortgages are now a ticking time bomb as when normal market conditions resume these mortgages will double in interest rate overnight, in many cases to over 10% interest rates.

Mortgage Expert, Chris Gardner, of UK mortgage and property website Obligo.co.uk said “these types of deals are at rates today that are much lower than they would be under normal market conditions. Borrowers have found themselves with mortgages that are artificially affordable. When rates begin to raise the effect will be disastrous”

Obligo.co.uk calculates that the average £150,000 interest only mortgage for these types of mortgage will increase £625 per month to over £1250 per month. Obligo provide free mortgage calculators http://www.obligo.co.uk/mortgage-calculators.html

Gardner went on “Clearly when rates rise back to pre-recession levels these borrowers will struggle to pay and many will get into arrears, and sadly then on to repossession. The problem is compounded by the fact that these self same borrowers cannot remortgage to cheaper deals with other lenders – the lending rules are now so tight for these kinds of borrowers that they now effectively mortgage prisoners – trapped in high rate loans they cannot afford”

Consumers who find themselves in trouble with a mortgage are urged to try renegotiate the terms with their existing lender if possible. In some instances lenders may reduce penalties and exit charges and in some cases have reportedly even paid borrowers to go elsewhere. If direct action with your mortgage lender fails find a reputatable broker and see what can be done. According to Obligo, even in the current market there are lenders who will listen if the loan to value and circumstances are right.



Obligo limited Publishing Guidelines

Permission is granted to publish all or part this article electronically in free-only publications, like websites or e-zines, commercial or non-commercial (print requires a permission) as long as the resource box is included without any modification. All links must be active. A courtesy copy is requested on publication to chris.gardner@obligo.co.uk.


Article Title: Clock ticking for low interest rate time bomb


Authors URL:  http://www.obligo.co.uk

Author Name: Chris Gardner

Contact email: chris.gardner@obligo.co.uk

Author Blog: http://www.obligo.co.uk/blog


Resource Box must be included

About the author:

Chris Gardner (chris.gardner@obligo.co.uk.) is a director of Obligo, the UK mortgage and property portal. Obligo provide consumers with free tools and information helping them to make well informed mortgage and property decisions.

Read more about Obligo, other mortgage and property related articles at http://www.obligo.co.uk/grapevine,for free mortgage tools and information go to http://www.obligo.co.uk


About obligo
Obligo is a new mortgage business based around a revolutionary concept that will provide consumers with tools and information about UK mortgages, whilst retaining a human aspect to case underwriting and application management.

Obligo intends to change the way UK consumers approach mortgages. Obligo is a unique collaboration of information and resources from both the UK mortgage and property markets.

Features that have recently only been available through websites and entities are collectively presented to the consumer in a simple, easy and effective manner.

Real-time house price information, automated property valuations (AVM), consumer guides, market analysis and expert market commentary is available together with industry leading mortgage calculators and application tracking systems.

Obligo Ltd is a privately held company with a highly experienced and proven management team with proven track records in start-up acquisitions and sales in the mortgage and other sectors.

The founders have set a course in the changing world of financial services to deliver transparency and efficiency to the UK mortgage market .
for more information email chris.gardner@obligo.co.uk

# # #

Obligo is a free to use consumer website for UK mortgages. Obligo provides free property valuation, mortgage tools and access to mortgage experts. obligo engages with consumers and empowers them to make well informed mortgage and property choices.