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Price slump may bring shock for fixed borrowers

A property slump could cause mortgage repayments to double for some borrowers, warns consultancy In2Perspective.

The consultancy points to the many homeowners who took out fixed-rate loans last year when the base rate was 3.5 per cent and who are still benefiting despite base rate rising to 4.75 per cent.

It says many of these borrowers will be looking to refinance at the end of the fixed term, typically two to five years.

But if house values fall, these borrowers could find they have insufficient equity to meet a new lender&#39s requirements for a discounted rate, forcing them on to higher standard variable rates.

In2Perspective believes those most at risk are owners with loan to values over 80 per cent, owners of new-build properties, self-cert borrowers whose payments are already stretched and buy-to-let investors who have refinanced to expand their portfolios.

Purely Mortgages marketing director Ian Giles says: “If you have a high loan to value, you should not assume you will be able to get a good rate in two years. If you want to shop around, you should reflect on what a 20 per cent fall in prices would mean in two years and whether the lender has a competitive standard variable rate.”


Clerical Medical – Balanced Managed Fund

Type: Oeic Aim: Growth by investing globally in equities, fixed interest and cash Minimum investment: Lump sum £10,000, monthly £400, Isa lump sum £3,000, monthly £200 Investment split: 56.6% UK, 13.6% US, 5.7% Europe, 3.2% Japan, 3.2% Pacific, 12.7% fixed interest, 5% cash Isa link: Yes Pep transfers: Yes Charges: Initial 4%, annual 1% Commission: […]


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Capital Market Notes, November 2016 David Lafferty, chief market strategist at Natixis Global Asset Management, looks at the impact on markets and portfolios since the somewhat surprising outcome of the US election. Click here


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