Mortgage changes may hit homeowners

Homeowners who are worried about the possibility of repossession should their mortgage costs rise may wish to watch the way rates are moving very carefully.

This is due to a warning from MoneySupermarket.com about the general trend for the cost of home loans to increase.

Research by the price comparison site has concluded that homeowners should look to fix their rate soon, as the cost of two and five-year fixed rates deals is creeping upwards.

It also noted standard variable rates have risen, which may make fixing a wise idea to save cash.

The study found two-year fixed rates bottomed out in October last year at 3.82 per cent on average and have since jumped to 4.15 per cent, while five-year fixes have increased from 4.57 per cent to 4.72 per cent.

Tracker rates are also up, with a two-year deal rising from 3.37 per cent in August 2011 to 3.63 per cent.

Mortgage expert at the site Clare Francis said: "Mortgage rates are nudging upwards so anyone looking for a mortgage or whose mortgage deal will end in the next few months should act sooner rather than later to secure one of the current rates in case they rise further."

People struggling with mortgage payments might also wish to seek a broader solution to their debt worries.

This could include a debt management plan or, if the amount of money owed has reached £15,000 or more, an individual voluntary arrangement (IVA) could save a home from being repossessed.

An IVA works through a deal under which creditors accept reduced payments – which would still be more than they would probably get if the debtor was to go bankrupt – while making the payments more manageable for the person in deep debt.

It will be legally binding on all creditors if 75 per cent of them accept it.

The Council of Mortgage Lenders has predicted the number of UK repossessions will be 45,000 this year, up from 36,200 in 2011.

Posted by Paul Thacker