Sharp rise in monthly repayments for tracker borrowers

06/10/2009

More than 100,000 people with tracker mortgages are likely to see steep rises in their monthly repayments.

According to broker John Charcol, those who have been enjoying near-zero interest costs since the fall of the base rate face paying hundreds of pounds more each month when their deals expire.

Many are set to come to an end this autumn and some could rise by as much as 4 percentage points, meaning someone with a £140,000 mortgage could end up paying an extra £500 a month to meet the repayments.

Hundreds of thousands of people took advantage of these deals during the early days of the economic downturn, with many of them charging interest of just 0.1 per cent.

Tracker mortgages at present charge interest of around 3 per cent and the steep rises they are likely to face could have a significant impact on people's personal finances.

Debt solutions firm EuroDebt has consistently warned homeowners of the risk that interest rate increases can wipe out any disposable income. If this looks like a reality then you should be planning for this now.

Unfortunately creditors don't have very long memories and any over payments you may have made whilst interest rates are low may count for nothing if you start missing or underpaying when interest rates increase. EuroDebt will always prioritise mortgage payments and other essential expenditure.

It may be the case that reduced payments to unsecured creditors are the only way of achieving this if rates increase and you can't swap to an alternate product. Managed debt solutions like a Debt Management Plan'>Debt Management Plan or an IVA are on the increase for home owners where re-mortgaging is simply not viable.

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