The mortgage industry is in complete turmoil at the moment as the result of the global credit crunch that swept across the UK last summer. Since this time the number of mortgage approvals has plummeted, the number of mortgage products on the market has plunged by two thirds, and many consumers have been left out in the cold when it comes to getting a mortgage or remortgaging. With lenders making it more and more difficult for consumers, many as a result of increased difficulties in getting finance on the wholesale money markets to fund their lending, the situation is set to get worse.

Over the past year and a half, with mortgage rates having risen five times between August 2006 and July 2007, those that had already taken out cheap fixed rate mortgages before the rate hikes began have been breathing a sigh of relief, as they have managed to avoid the rising repayments resulting from the interest rate hikes. However, this period of respite is due to come to an end for many, with a huge number of these cheap fixed rate deals due to come to the end of their fixed rate terms.

This means that many will find that their mortgage rate suddenly shoots up by a huge amount to the lender’s standard variable rate, and this could add hundreds of pounds on a month onto some mortgage repayments. Of course, consumers can look at remortgaging to a better deal, but with availability and accessibility to mortgages so poor at present many may find it difficult or impossible to do this.

Authorities are now concerned that around 1.4 million homeowners could be facing rocketing mortgage costs over the remainder of this year, and the rise in repayments is likely to see many more households fall into arrears with their mortgages, resulting in a rise in repossessions. These figures come from the Financial Services Authority. However, in order to try and ease the situation a number of professionals including MPs, officials from the Money Advice Trust Charity, and officials from the Council of Mortgage Lenders, have been trying to put together advice for homeowners that are facing this bleak future.

One official involved with the initiative stated: “The idea behind the initiative is to give free early advice to these borrowers coming off their fixed-rate deals and highlight key sources of independent and free confidential advice, such as adviceUK members, Citizens Advice Bureaux, Business Debtline, National Debtline and the Consumer Credit Counselling Service.”

She also said: “We have already seen a 16% increase between 2007 and 2008 in clients contacting National Debtline for advice regarding mortgage and secured loan arrears and we fear that people really are starting to struggle with their mortgage payments as credit becomes more expensive to service. Our experience suggests that if you do get into difficultly, seeking free independent advice as soon as possible is the best option to help you sort out your problems. There is always something that can be done and the earlier you seek advice the more options you will have.”

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