Mortgage...should I be worried?

[Lakitu]

The mortgage I have is a 2 year fixed rate, which expires in June 2009.

I'm not very sure if that means that my lender will automatically give me a new rate for a further 2 years or if I have to go about finding another lender?

If it's the latter, given the current economic climate, what will I do if nobody will give me a mortgage?

[stoofur]

I think that at the end of the fixed rate you will revert onto a variable rate with your mortgage. But I believe the rate will not be very good and that is why you should try and find an alternative by the end of your fixed rate.

[Lakitu]

OK, so I go searching for another lender and nobody will lend, I'll not be up the creek without a paddle?

Phhhheeeeeeeewwwwww!

[Lakitu]

I've just had a thought, which has me in palpitations again, my lender is Northern Rock and I'm not entirely sure they are renewing mortgage's.

Am I going to be in such dire straights as what I'm imagining?

[annie0000]

The availability of a new mortgage will depend on a lot of things:

The amount you want to borrow v's the value of your property i.e. the loan to value (ltv)

Your history of payments

Your ability to pay.

The sticky bit for a lot of people will be the change in ltv of their loan. As properties have decreased in value, you may find that you may have previously had a ltv of 80% - now that may be 95% for example, and the mortgage you want may set a minimum ltv of 85%.

You may therefore have a reduction in the choice of mortgages available.

Lenders may also be reluctant to lend to people with a higher ltv or poor payment history or who have had a change in financial circumstances as their ability to pay may be affected by job changes, less available overtime, increase in living costs etc.

It may not be a case of not getting a mortgage, more a case of not getting the one you want. Personally, I would look about, but read carefully the terms of the mortgage to ensure that you meet the criteria prior to applying - multiple rejections will not look good when applying to lenders.

[annie0000]

Sorry, no idea about the situation with Northern Rock - is it new customers they are not lending to or new rates, you will probably find that your existing mortgage will revert to a standrad variable at the end of the fixed price period, so you would not necessarily be getting a new mortgage unless you want to change to another deal.

[Lakitu]

OK, I've never been in arrears, so that's got to stand me in good stead. My job is steady with <1% chance of me being made redundant (no overtime is paid to me, so my salary is the same every month).

I'm concerned about what you say about the value of the mortgage. When I bought the house it was valued at exactly what I paid for it (at my request to the surveyors, it's commonplace up here) and have a 95% mortgage. Since then I have done a lot of renovations, do you think I could have it revalued before I start looking and wing it that way?

Oh gawd, I'm having visions of me being homeless here LOL.

[Lakitu]

I'll give Northern Rock a call when I get home.

[Ethel]

Stop panicking.

Your mortgage will not be revoked at the end of the fixed period. You will not be looking for a new mortgage.

Your mortgage will continue at their variable rate and it is up to you if you want to get a new mortgage either with NR or any other lender.

If you do nothing, you will just pay a possibly different amount each month from the same bank account to the same mortgage account.

All that changes is the rate

[annie0000]

I dont think that you are likely to be made homeless, you just might have less choice available to you, you sound in a reasonably good position, and at the end of the day, although lenders are being more cautious, they have to lend otherwise they dont make any money!

I think that your worse case scenario is that you have to remain on a standard variable with Northern Rock, not that bad really, considering that interest rates are the lowest that they have been.

i wouldn't necessarily go and get a valuation - lenders are likely to want to use their own anyway. Just be aware that the value may have dropped rather than increased, so that is a mortgage stresses a minimum ltv of 85%, you may not be eligible.

There will be people who took out mortgages of 110% on properties that have dropped in value - they are the ones that will be most concerned.

[Lakitu]

Thank you, Ethel. I will still scout about and see if I can get another fixed rate, but as long as I'm sure I'm not out on the street if that doesn't happen.

I was feeling a bit sick for a while there LOL

[Lakitu]

Thank you Annie, you've set my mind at rest too. I'm glad I won't be in the position I was imagining.

[Ethel]

I would be extremely surprised if you have a two year mortgage - that never happens.

You have a mortgage of x amount of years (20; 25; 30) with the first two years fixed

[annie0000]

http://www.northernrock.co.uk/mortgages/curren t-rates/residential/

looks like the current svr is 5.84

[Lakitu]

Sorry, that's what I was trying to ask, Ethel. My mortgage is over 25 years and the first 2 are fixed. I wasn't sure if I'd be kicked out after that 2 years or not.

[Lakitu]

That's great, Annie. I'm pretty sure I'm on 6.69 at the moment so looks like my payments will come down for a while.

Thanks again for easing my mind LOL

[factor-fiction]

A similar question was asked last week- the answers may also help you.
http://www.theanswerbank.co.uk/Business-and-Fi nance/Personal-Finance/Question654579.html

[Lakitu]

Thanks Factor, that has helped reading that other thread too. Nothing came up on the similar questions before I posted this :o)

[jedimistress]

The interest rates are very low at the moment and you may find that when your fixed rate reverts to the standard rate that your monthly payments may even be less.