Hi, I was wondering if you could give me some advice. I remortgeged my house in July 2007 for £180,000. It was a fixed rate deal for 3 years at 6.39% interest over 34 years so I pay around £1086 per month. In July 2010 the interest rate will go up to 7.88% which will mean an extra £300 per month. I`m obviously worried about this especially due to the fact that my house is probably only worth about£165,000 now. Do you think prices will go up again in 2010? Also do you think my mortgage lender (Advantage) will allow me to go interest only or would they decrease the 7.88% rate as interest rates have gone down so much recently?

It is too far away just yet for anyone to predict what will happen (with any certainty) to house prices in 2010. It is pretty certain that they will continue to fall in price throughout 2009 though.

As you are already in negative equity I think you should go and see your lender (someone of authority and not just counter staff). Plead poverty/hardship and tell them that you are struggling to keep up the repayments. All banks and building societies have been directly instructed by the Government to do MORE to help people just like yourself and in your exact situation. It is up to a responsible lender to show that they are doing all they can to help you and they should offer you some alternatives. I think you may be favourably surprised by the amount of help you get now from these people! IF you were to get any unhelpful or negative responses from your particular lender (although this shouldn't be the case), you could make an appointment to see your local MP at one of their regular surgeries and ask for his/her backing/assistance.

Good luck.

Hi thanks for your message.

As it turns out I dont think I`m in too much trouble. I contacted my mortgage lender today and was told that when my fixed rate ends the interest rates will be adjusted quarterly to reflect any change in LIBOR (London Interbank Offered Rates) which at the moment is 2.98% so if they stay like that i`m saving roughly £350 per month! Worst case scenario is they go up in the next 18 months but as long as they dont jump from 2.98% to over 6.39% then I should be ok. I`m not looking to sell in fact I hope to still be living here in the next 10 or 15 years so by then I hopefully wont be in negative equity. Have I got my sums right do you think? Any feedback will be apprieciated.

Hi Sue, that's great news from your lender! The good thing is that you are thinking positively. You are doing the right thing in viewing your property as a 'home' first (intending staying 10/15yrs) and as an 'investment' secondary. Your homes' value is going to drop even further in the next 12 to 24 months and maybe even possibly longer. In that time you will see and read some horrendous stories with some people losing their jobs, national repossession figures going up; you know, the usual doom and gloom. 10 to 15 years is a relatively long time and these things are ALWAYS cyclical. In 10 to 15 years your home WILL have clawed back all of the negative equity and WILL show you a profit in financial terms eventually.

The Libor rate is very important for banks as it is the rate that they use to raise money on the money markets. There is a difference between the Libor rate (amount THEY are being charged) to what they will charge to their customers with mortgages, loans, overdrafts etc. This difference in the 'Libor' rate and the interest rate they charge their customers is the 'main' way that they make their money! Depending on a raft of complicated banking criteria such as money flows, profit projections (or debt), shareholder dividend payments and a hundred other factors totally out of yours or anyones control, as to the future increases/decreases in the Libor.

The sooner that you personally can get a 'fixed rate' on your mortgage that you are happy with and that you can afford now, then please take it! If you want some kind of peace of mind and to be able to sleep at night, these are very unpredictable financial times and NO ONE knows with any certainty exactly what is around the corner.

Good luck.

Sorry Sue I forgot to mention in my previous post back to you....and sorry to be the bearer of bad news but you did ask 'if' you had got your sums wrong? Yes you have I'm afraid!

As I mentioned above, the Libor rate is the rate that is charged to banks themselves and not to you. You are being told (quite rightly) that your new arrangement will be based on a quarterly adjustment to 'REFLECT' any change in the libor rate (up or down). You can only use the Libor rate as an indicator, you then need to add on to that whatever rate your lender is going to charge on top to you.

The fact that you are 'not in trouble' now is fantastic but do take some advice and make sure that is how it stays for you over the next few years too. Because of your negative equity situation which is going to get worse before it gets better, you really do need to know that you can afford your repayments long term and is why I have suggested to you a 'fixed rate' if at all possible.

As before, the very best of luck to you.

Hi Sue

What you need to check is your original Key Facts Illustration and Offer of advance from Advantage. This will clearly show what your revert rate will be when the fixed rate ends. It will not be 7.88% as this will purely be the indicative rate which applied at the time of your application. It will typically be a rate above LIBOR such as LIBOR + 1.99% i.e. if LIBOR remains @ 2.98% then your pay rate will be 2.98 + 1.99 = 4.97%

I am an independent mortgage strategist I have been frustrated by the difficulty of contacting Advantage on behalf of my own clients. It would be most helpful if you could confirm which number you reached them by on Monday.

many thanks

Hugh

Hi Hugh

I called advantage today based on the last message you sent me and I spoke to someone with a bit more knowledge than the previous person! She told me pretty much what you just have that their revert rate will be 4.98% so you werent that far off with 4.97%!! That will save me about £150 per month. She also said I could switch to interest only which isnt ideal but could get me out of a pickle if needed (at least til my house price goes up again). The number I contacted them on is 08448921094

Thanks for your advice

Sue

Hi Sue

Glad to be of help and thank you so much for that phone number which I have now passed on. Glad you won't be a victim of "Rate Shock").

best wishes

Hugh

Hello again Hugh

I just wanted to bend your ear on something else if thats ok? Ive recently become aware of solicitors/claims companies claiming that they can "get your mortgage written off". I recieved an email from a colleague at work who knows a guy who works for such a company and the letter says that people who had a mortgage between 1990-2005 can write off their mortgage as it may not have conformed with the consumer credit act 1974. They say they can do this on a no win no fee basis. Obviously I`m tempted but just wondered what your thoughts were.

I wonder if the 7.88% rate you quote was written on your original illustration in 2007,and this might have been the bank's Standard Variable rate at that time.I thought most mortgage deals reverted to the bank's SVR at the end of the "DEAL "period.In which case the bank might well have a SVR now of 4.5-5% not 7.88%,so you might actually find your mortgage payments would be cheaper at the moment on the bank's SVR than your fixed rate deal.We recently sold a flat in Scotland for 75 k beneath it's valuation 6months earlier ,this represented a 25% fall in value between April 08 and Dec 08.This was a desirable flat,which normally are snapped up in a day or so.It took 6 months to sell.Our upstairs neighbour sold their flat for 125k more than our's a year earlier.So be warned what you here reported on the news is 3 months late,and the housing market and values are in our experience MUCH WORSE than that being reported on TV.A valuer will likely knock 25% off the previous value of your home if it's revalued.We also know this because a second property we have spent 12 months renovating has hardly increased in value at all on paper.Our estate agent at the time,who was the main man for a major chain of estate agents,said he had been at a pow wow meeting of estate agents in Scotland,the advice was it will take five years for house prices to regain what they have lost currently.Hope this helps.

Hi Sue,

I was interested in reading your question concerning 'writing off mortgages'.

I have also heard of similar claims; however at the moment I have only been able to find claim companies/solicitors that deal with Credit card and loan claims, ie to write off the balance if they do not conform to the CC Act 1974.

I would be very interested and appreciate it if you were able to give me a contact for the company that you believe is offering this service for mortgages, as I believe my (elderly) mother was mis-sold a mortgage a couple of years ago, and I have been trying in vain to find anyone that believes they are able to dispute mortgages under this Act.

I hope you can help me, and hope that you have found the information that you were searching for too.

Many thanks,

Morton

Hi Morton

The company that I may be interested in using is Loan Check, I`m not sure if you can do anything for a mortgage as recent as 2 years ago though. This is the only company that i`ve come across that dont charge you a fee upfront, they say they recoup the costs from the lender. I`m still in the very early stages so can`t relly advise you on anything else. It was actually quite nice to have someone not slagging me off for looking into this (see previous replies to my question)! The way I see it is if you default on a mortgage or credit payment the lender wastes no time in charging you money for defaulting because as they see it you have broken the contract, however the lenders have (apparently) been breaking rules in the 1974 consumer credit act for years so why should they get away with it?!

Sue