I note from reading American articles that over the pond repossessions are almost wholly a subprime problem. I can assure you that isn't the case here in the UK - and this point is likely to be reinforced in the near future.
Through my job (I am a Mortgage Adviser and closely work with Estate Agents), I am privy to finding out the repossessing lender in homes which are marketed within the Agency I work in. I know this may not be reflective of the country as a whole but I am finding that the majority of repossessions are properties secured with Northern Rock. Now please note that Northern Rock were never a subprime lender. Rather than defaulting on the mortgage because they are people who can't handle credit very well it is more likely that they have been the victim of "rate shock".
Rate shock occurs when people come off their "mortgage deal", whether it is a fixed rate, tracker, discount or whatever. The loan reverts from the deal to the respective bank or building society's Standard Variable Rate (SVR). This rate will generally be 1 or 2% higher than the deal, meaning a huge jump in monthly payments. In the past people would remortgage in order to avoid going onto the SVR by getting a deal with another bank. Due to the Credit Crunch though the banks don't want you if your mortgage is large compared to the value of your house - as many Northern Rock customers have found out.
The scary fact is that 1.2 million homeowners currently on fixed rate deals are due to end within 6 months. Many of these people will have little to worry about - but I estimate that the vast majority will see an increase to monthly payments and at least half will have to adjust their lifestyle in order to cope with rate shock.
The only way of cushioning the blow is to reduce your mortgage debt now in order to soften the blow of rate shock. By taking action now you can offset the jump in monthly costs. Take a look at your finances today. Check that you can overpay on your mortgage and then do so. Every penny counts - literally.
Article Source: http://EzineArticles.com/?expert=Ross_Taylor
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2 comments:
These foreclosures are happening in the US too, now, especially in high-cost states like California. Sub-prime led the way, but it sounds like 'rate-shock' is going to be bigger and meaner over here too.
I was in town today and shocked to see the number of Estate Agents with, "This Weeks Repo's" boards in the window.
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