Nelson Mortgages

Concerns over the effect that interest rate rises will have on homeowners that are currently in cheap fixed rate deals have been rife for some time. There are many homeowners that took out cheap fixed rate mortgage two or three years ago, with many paying under 4.5% on their mortgage loan. However, between August 2006 and July 2007 interest rates rose five times, taking the base rate from 4.5% to 5.75%. Between July and November the base rate remained unchanged at 5,75% but at the beginning of December the Bank of England cut the base rate by 0.25% bringing it back down to 5.5%.

However, for those on very cheap fixed rate deals that are due to come to an end in the coming months the financial impact could still be very significant, and those with larger mortgages could find themselves looking for hundreds of pounds more each month in order to keep up with their mortgage repayments. Experts are predicting that the level of repossessions will soar as an increasing number of people find that they cannot meet repayments on the higher interest rates.

Some experts have put forward shorter term suggestions to help those in this situation keep a hold of their homes until interest rates come back down. It is thought that the Bank of England is likely to cut rates further at least twice next year, and some think rates could fall as low as 4% by the end of 2008. In the meantime some homeowners coming off cheap fixed rates could lessen the impact by extending the term on their mortgage as a short term solution. Another shorter term solution suggested by one expert is to switch to an interest only mortgage in order to keep repayments down.

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