Mortgage deals ending - Scotland

250,000 UK homeowners face minimum mortgage increase of £100 a month to secure a new fixed-rate mortgage deal. Wages would have to rise by £2,000 a year to maintain the status quo.

A typical homeowner with a £150,000 mortgage would need to see their wages increase by at least £2,000 a year in order to find the extra cash needed to take out a replacement fixed-rate or discounted mortgage deal, according to expert debt solution firm Newtomorrow.com.

A quarter of a million UK homeowners will see their two-year fixed-rate mortgages end in the next three months and will find themselves paying at least £100 a month more for a new fixed-rate deal after a sequence of rate rises this year pushed up the cost of borrowing.

In October 2005 the average interest rate on a fixed-rate mortgage was 4.96% – according to figures from the Council of Mortgage Lenders – or around £885 a month on a £150,000 mortgage.

Many current fixed-rate deals are around 5.79% which is around £996 a month – an increase of more than £100. Borrowers with £250,000 and £60,000 mortgages could see rises of around £189 and £40 respectively – significantly more if homeowners revert to lenders’ standard variable rates.

However, with the recent turmoil in the financial world, and inflation running at 1.8% – below the Bank of England’s 2% target – many analysts are predicting that interest rates may be cut later this year.

John Hall, chief executive of debt solutions firm Newtomorrow.com, said: “Several rises in interest rates over the last year have made all mortgages more expensive, and anyone coming off fixed-rate or discounted deals in the next few months will have to find extra cash. Anyone struggling to pay their other debts as a result of these mortgage rises and facing serious financial problems should seek professional & expert debt advice at an early stage.

“The recent troubles with Northern Rock and the subsequent credit squeeze may be a double edged sword. It looks as if another rate rise has been averted and that the next rate movement may actually be downwards. We are already seeing some better fixed-rate deals appearing. However, those who have poor credit histories may find it almost impossible to get a new mortgage deal at all as banks shirk from high-risk debt and raise interest rates further on sub-prime deals.”

The average fixed-rate mortgage in October 2005 was 4.96% with 142,600 mortgages taken out – accounting for 75% of deals. Fixed-rate mortgages currently account for around 79% of all new loans taken out.