Mortgage Rates to Rise to 9% Speculation that 9% mortgages on their way!

Coming to a bank near you: the 9% mortgage


 
We are certainly still in unusual and difficult times, and whilst many people are happy languishing in the current low monthly payments on their mortgages due to the low base rate - their are hidden dangers ahead. The current historic low interest rates driven by the Bank of England's 0.5% base rate will not last for ever, Lord Turner compiled an extensive report on the reasons for the bank failures and what actions may needed to be taken to correct them for the future.

 

Hidden inside the report was a stark warning - that if lenders are currently charging - 3- 4% over the Bank of England base rate - if interest rates rise to their more normal 4% - 5% then if they kept their margins the same borrowers could be paying in the region of 9% as early as March 2010. With the banks desperate to regain profitability and clear their toxic debts it could be normal people like you and me that end up paying much higher interest rates for years to come.

 

In fact my personal prediction is that we could see people suffering a double whammy. With the first part being the potential massive rise in mortgage rates. The second part of the double whammy will come as people who have enough equity in their houses today to get a good 65% LTV deal, may find that their property price continues to fall and by 2010 they may have to go for a more expensive 70% or 75% deal costing them thousands in setup fee's and much higher interest rates. I expect a huge flood of people desperately trying to fix their interest rates towards the end of 2009 / early 2010 - but will this be after the floodgates have closed ?? It could be even worse for people who may have lost some or all of their household income through reduction in overtime, commissions or even job losses - as lenders are increasingly cautious about income multiples and allowing interest only mortgages.

 

There is absolutely no doubt in my mind and if you research the markets I am sure you will find numerous other eminent people saying the similar - If you are in a good position to remortgage it is my prediction that the summer of 2009 will be the best time to get the lowest fixed rate deals for quite a while.

 

David Farrell