Facing Repossession After a Fixed Rate on Your Mortgage

By: Martyn Barberry

Fixed rate mortgages are a great way to fix your mortgage payments, removing the worry of potentially increasing interest rates. The problem occurs when the fixed rate period at the start of a mortgage comes to an end, unless the borrower has planned for a potential increase they may face financial problems.

In the UK we are currently experiencing this problem as borrowers that took out fixed rate mortgages a few years ago, when rates were significantly lower than today, are now reaching the end of their fixed rate period.

This is a serious issue and could potentially lead to an increase in repossessions, this is borne out in recent figures that indicate that at auction, the number of repossessed properties being sold has risen from 25% to 50% during the past year. It is thought that repossessions will rise by 50%, with up to 30,000 repossessions by the end of 2008.

Even with the small rate cut by the Bank of England this month (December 2007) borrowers are still facing a large increase compared to the rates they fixed in previous years.

What can borrowers do if they face potential repossession after the end of their fixed rate period. Everybody's case is unique but generally one of the following solutions are available.

Quick sale: A quick sale can be attractive in these circumstances, this can be via auction or specialist home buying companies.

Rent back: Some companies offer the option of buying your home and then renting it back to you at a rent that you can afford. It is sometimes possible to buy back your property if taking this option.

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