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20 June 2007
Homeowners in the UK who have fixed rate mortgages could start to feel the financial pinch when it comes to their repayments, as their fixed rate periods start to draw to an end.
Many customers got a great deal on their fixed rate mortgage several years ago, and have been enjoying lower repayments on their mortgage as a result.
Those on fixed interest rate mortgages have also managed to avoid the financial impact of four interest rate rises in less than one year, which have resulted in dramatically increased repayments for anyone on a variable rate mortgage.
However, by the end of this year around a million people that were previously on fixed rates could feel the harsh financial impact of rising repayments as their fixed rate periods come to an end.
There have been four interest rate rises in the past year, each for a quarter of a percent, and the base rate has risen from 4.5 percent to 5.5 percent between last August and this May.
Anyone on a variable rate mortgage have been able to deal with these interest rate rises gradually, a quarter of a percent at a time.
However, those that were previously in fixed rate mortgages will be hit with all four rises at once, as their fixed period ends and their interest rate reverts to the standard rate of their mortgage.
According to some analysts, a number of homeowners could see their interest repayments rise by up to thirty percent, which could equate to a huge difference in the amount that they were paying on their fixed rate and the amount that they will be paying on the standard rate.
Even those that decide to opt for another fixed rate once their existing fixed rate period ends will have to opt for a fixed rate based on today’s base rate, so this means that their repayments will still be far higher than they were previously.
It is thought that around one million homeowners could see their fixed rate periods come to an end by the end of this year, and could therefore be lumbered with far higher mortgage repayments.
One major concern that is being voiced with regards to this problem is the possibility of increases in repossession and bad debts, as homeowners start to struggle with their repayments.
Those with very large mortgages will of course be hardest hit, and in some cases homeowners could find themselves unable to keep up with repayments, which in turn could lead to defaults and events repossession of the property.
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