by Mark Johnston
The only thing anyone can be certain of in theses hard times is that we all have an uncertain financial future.
Although many aspects of the property and mortgage market have been seemingly encouraging in recent months, with Barclays for one relaunching into 90% loan to value (LTV) mortgages and the Nationwide also improving their availability of high loan to value (LTV) loans.
David Hollingworth, of mortgage brokers London and Country, stated that “the continued problems in the euro zone have resulted in an increase in funding costs for lenders and that is feeding through to the UK mortgage products”.
The Nationwide building society announced in December 2011 that some of their borrowers were to face paying around 60% extra on their mortgages from March 2012.
This has happened as the Bank of Ireland was forced to sell some of their assets to Nationwide and therefore around 14,000 Bank of Ireland customers were transferred to the Mortgage Works group, which are a part of the Nationwide.
Borrowers with the Bank of Ireland were on the banks standard variable rate (SVR) of 2.99% once they were transferred however they found out that they would see their rates soar as the mortgage Works standard variable rate (SVR) stands at 4.79%.
An interest rate rise like this could mean that a £200,000 mortgage could go up by £300 per month and therefore be catastrophic for many households.
Ray Boulger, the senior technical director at mortgage brokers John Charcol, said of this move, “I imagine recipients will be very worried. A potential increase of this magnitude in only 2 months will be a massive shock”.
However these borrowers seem to have been given fresh hope, as the Mortgage Works is said to be considering moving the rates up in stages rather than the initial idea of switching the borrowers straight over to the higher standard variable rate (SVR), instantly.
A director of mortgage advisers ‘Your Mortgage Decisions’, added he was equally concerned and stated “I struggle to understand how doubling someone’s mortgage interest rate will not cause a rate shock even if done over many months”.
Brian Murphy, of mortgage brokers ‘Mortgage Advice Bureau’, said “even though the proposed SVR looks high compared to the starting position, some borrowers will have little or no equity, so many will find it difficult to move anywhere at present”.
Many experts believe that if the Nationwide building society wants to retain as many customers as possible it would be in their best interest to let borrowers know quickly of their alternatives.
Although how easy it will be for them to re-mortgage will depend on their loan to value (LTV) ratio’s, credit status and also if the borrowers are on an interest only deal.
Eddy Weatherill, of the independent banking advisory service suggested that “at the moment nobody trusts bankers. We need good standards of service and ethical behaviour to change that”.
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