Monday 29th of June 2009
Many homeowners may be considering changing their mortgage to a tracker deal to take advantage of the cheaper offers on the market while the interest rate remains at 0.5 per cent.
However, one financial expert has advised Britons to remember that a one per cent change in the interest rate could result in many homeowners struggling to meet their monthly payments, a situation where an individual voluntary arrangement (IVA) could help.
Louise Cuming, head of mortgages at moneysupermarket.com, said borrowers should not be drawn in by the chance to make short-term savings by opting for a tracker mortgage deal.
If the interest rate climbs by two per cent, payments on a £150,000 mortgage would increase by £76, while a rise to the October level of 4.5 per cent would see the figure increase to £260.
Should homeowners find themselves struggling to meet their mortgage payments when the interest rate rises, an IVA could be of assistance.
By reducing other financial commitments such as loans and credit card repayments, homeowners could find that an IVA allows them to put more cash towards their mortgage.
"[Mortgage holders] must take the expected base rate rises into consideration right from the start and make sure that they can still afford repayments when the Bank of England begins to reverse the cuts," Ms Cuming stated.
- House price rise 'may not indicate recovery'
- Equity release 'needs to be increased'
- Need for IVA help could increase as expert predicts reduction in lending
- Government announces 'breathing space' for those needing IVA help
- Lack of subprime lending creating need for IVA help, expert suggests
- IVA questions might help Brits avoid financial crisis
