Millions facing mortgage misery
MILLIONS are facing huge rises in their mortgages as banks continue to pass the cost of the credit crunch onto homeowners.
As falling house prices push thousands into negative equity, figures released today show the average cost of certain fixed rate deals has also jumped to a new eight year high.
Lenders continued raising their rates to reflect the problems in the market caused by the credit crunch.
The average cost of a two-year fixed rate mortgage for someone with a 25 per cent deposit rose by 0.21 per cent during May to 6.27 per cent, its highest level since September 2000, when interest rates were at 6 per cent.
The change was even steeper for people taking out a five-year fixed rate loan with the same size deposit, with the cost of these deals rising to 6.11 per cent compared with 5.85 per cent in April.
Falling house prices are pushing thousands into negative equity
But fixed rate deals are not the only ones that are increasing, with the Bank of England figures also showing that the average cost of a tracker mortgage with a loan to value ratio (LTV) of 75 per cent rose by 0.2 per cent during May to average 6.19 per cent, down only slightly from 6.24 per cent in January, despite base rates being cut twice since then.
The Bank of England data also failed to give a figure for the average rate of a two-year fixed rate mortgage for someone with a 5 per cent deposit for the first time since 1995 due to having insufficient data on the loans.
There are now just 18 different two-year fixed rate mortgages for people with a deposit of this size available across the market, compared with 235 in July last year.
A combination of falling house prices and tighter lending practices have led to lenders demanding increasingly high deposits from borrowers since the beginning of the year.
Across the whole mortgage market there are now just 168 residential loans available on an LTV of 95 per cent out of a total of 3,167 different mortgages, compared with nearly 1,000 a year ago.
Meanwhile figures from the Council of Mortgage Lenders showed that 23,200 100 per cent mortgages were taken out during the year to the end of March.
People who take out these loans are vulnerable to getting into negative equity when house prices are falling because they do not have the cushion of a deposit.
But the CML stressed that it was important to see the figures in context, adding that they represented less than 3 per cent of the 900,000 new mortgages taken out during the period and were a tiny proportion of the 11.8 million mortgages that are currently outstanding.
The group also said it was wrong to assume that all of these people would be in negative equity as price falls varied across different areas and people would be repaying their loans at different rates, while being in negative equity was only a problem if homeowners were forced to sell their property.
