Member Article

Warning over the end of fixed rate loans

With Watson Burton LLP Law Firm

The Financial Services Authority (FSA) recently warned consumers over the growing number of people due to re-mortgage within the next year. As many as 1.4 million short term fixed rate mortgages will come to an end in 2008 and with the recent credit crunch, many consumers may find it hard to find a suitable replacement facility.

Consumers will be faced with significantly higher interest rates, meaning that many first time home owners, or those who have a high loan to income ratio, will struggle. It has even been predicted that sub prime borrowers who need to re-finance their loan facilities may be priced out of the market leaving repossession as a very real threat.

The FSA has highlighted the need for lenders to have in place a fair policy for dealing with consumers who find themselves in arrears. The main focus of the FSA’s suggestions revolves around making it easier for consumers to catch up on missed payments and using repossession as a last resort. The FSA has stated that lenders need to be more accountable in relation to lending responsibly and assisting consumers who fall behind on payments.

It is therefore likely that the increases in interest rates over the last year or so will not only have a significant impact on those first time buyers we hear so much about in the press, but will also significantly affect consumers requiring a re-mortgage who are similarly likely to struggle.

Should borrowers find themselves in a situation where their mortgage is no longer affordable, their lender should be the first point of contact. As already mentioned, the FSA has highlighted the importance of lenders working together with consumers in order to come up with a manageable plan to avoid repossession.

If you have any queries relating to this article, or any other property matter, please contact Rachael Douthwaite at Watson Burton LLP on 0191 244 4444 or email rachael.douthwaite@watsonburton.com.

This was posted in Bdaily's Members' News section by Ruth Mitchell .