Sunday 31st of January 2010
Homeowners on a tracker mortgage who have had to fork out less than usual may be in for a shock when interest rates rise, although an individual voluntary arrangement (IVA) could help pull household finances out of the red.
According to The Motley Fool, the money saved each month on mortgage repayments should be put to good use in order to prepare for an increase in interest rates. For example, the extra cash could be used to clear unsecured debt such as personal loans.
But if personal loans are over £15,000 and money is owed to a number of creditors, homeowners confused about where to start may want to ask some questions on IVAs to see if they can prove to be of assistance.
IVAs can merge different personal loan repayments into a single, lower-rate monthly one, while the interest on such borrowings will be frozen.
This could mean that unsecured debt is now left on the backburner when mortgage rates rise and homeowners need to dig deeper in their pockets to meet their home loan repayments.
David Kuo, director at The Motley Fool, said: "They need to make sure that if they have £110 extra each month they have got to do something with it."
By Chris King
- 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
- Could capping debt remove the need for IVA help?
