Mortgage interest rate rises will be a double whammy for Northern Ireland home-owners caught in negative equity, it has been warned.
Home-owners here are set to see their monthly repayments rise following a hike in interest rates by a number of high street lenders including Halifax, Bank of Ireland, Co-operative Bank, Clydesdale/Yorkshire, Natwest/RBS offset mortgage and One Account.
And that will be a double blow for those in negative equity, according to an independent mortgage broker.
Siobhan McAleer, managing director of The Mortgage Shop, an independent mortgage broker which has 18 outlets province-wide, says: “The problem for people in Northern Ireland is that many home-owners cannot move because of low valuations. And those who are in negative equity will not be able to shop around for a better mortgage deal as they don’t have enough value in their property — you have to have at least 20%.
“Not only will they have to pay the mortgage on a house which has diminished in value, but they are stuck with the lender who puts up the rate.”
The price hike on the standard variable rate (SVR) mortgages ranges between 0.25% for the One Account and NatWest/RBS offset mortgage to a 1.5% rise for Bank of Ireland customers.
Ms McAleer said: “Banks are raising the standard variable rate in a bid to get their balance sheets in order and chip away at their debt, and it is their customers who will pay the price.”
Alongside bigger charges, the independent broker said those considering moving their mortgage will need to do their homework.
But it might not be all bad news, as she warned existing customers of lenders such as Nationwide and Cheltenham & Gloucester need to study the details of their mortgage deals before jumping ship.
“Nationwide and Cheltenham & Gloucester gave their customers a guarantee the rate would not go up more than two per cent above the Bank of England’s base rate, but not if you’re a new customer. If you’re an existing customer, then you’re in a good position because you are protected.”
Home-owners with mortgages elsewhere, though, also need to look closely at what they are paying in terms of interest rates.
Ms McAleer pointed out: “While Bank of Ireland is putting up its rate, this is coming from a low position, whereas Santander has had a higher rate for the previous two to three years. It’s the same for Halifax —yes, they put the rate up, but again it is still cheaper than Santander. Home-owners need to be careful to ensure they are not losing out on their existing deal.
“Until banks get their balance sheets sorted, it will be customers paying the price,” she added.
And with banks charging bigger fees for new mortgage packages, home-owners need to be savvy and not just be sold into a new deal by attractive interest rates, the mortgage broker advised.
“If the rate difference is half a per cent, the fee may be high, so there are a lot of variables to consider if you are going to move your mortgage,” warned Ms McAleer.