Interest Rate Changes

[northumbrian69]

I have been in an IVA for almost 2 years, since January 2007 my mortgage rate has changed 9 times, from April 2007 until May 2008 I have been paying varying amounts in excess of the original mortgage repayment stated on my IVA proposal, at one point I was paying £40/month more, none of this was taken into account at my 1st review, my IVA payment remained the same.
Since the recent very large interest rate reductions, from January 2009 I will be paying £110/month less than my original payment, will I be expected to pay more because of this recent reduction[?][?]
It would appear, reading some of the posts on the forum that increasing an IVA payment is very easy but reducing payments requires a variation meeting.
I would hate it if my payments were to be increased only for the interest rates to go back up again which judging by the current unstable financial market is highly likely.
What do the experts think[?][?]

[MelanieGiles]

You can expect your IVA payments to be adjusted if your mortgage payments have dropped, but equally the same ought to apply when interest rates are higher. As we expect that rates are unlikely to increase much over the next year or so, this should not really be an issue - but you do make a good point that it is always easier for IPs to raise IVA payments than reduce them. This has in someway been addressed in the IVA protocol, where IPs may reduce payments by up to 15%, but the IVA then has to be extended to take account of the reduction.

[northumbrian69]

Will the adjustment be for the full reduction amount or a percentage[?][?]

[MelanieGiles]

That will really be down to your own IP northumbrian, and this is unlikely to be reviewed until it is time for your next annual review - at which time all of your areas of expenditure need to be looked at and not just those which have reduced.

[liberta]

Melanie, where does it say in the Protocol ST&Cs that the arrangement has to be extended if the Supervisor uses his or her discretion to reduce the payments by up to 15% - have just looked and I cannot find it.

[MelanieGiles]

You are absolutely correct Elizabeth. Thank you for picking me up on this point - so much of my work involves Northern Rock debt, I think I am so used to seeing the standard Eversheds modification which does extend the term, I have even believed that is has become part of the protocol myself.

I stand very firmly corrected!!!

[David Mond]

I don't believe Interest rates will rise in the foreseeable future - maybe in 2 to 3 years - on the contrary coiuld well go down.
Well Northumbrian69 why don't you do a current I&E and see whether you need to do a variation based on increased overall costs.

[northumbrian69]

Thanks for the advice David.
I have done as you suggest and done an I & E based on the current CCCS guidelines kindly provided by Melanie's company.
I have factored in my gas and electricity providers increases of +30% & +19% respectively and the current large reduction in mortgage rate.
It would appear I have £70/month more surplus income now than I did when my IVA was approved in April 2007.
I don't feel £70/month better off, I draw all my 'surplus' available cash from the bank every month, split it into 4 and use each amount for weekly housekeeping costs, anything left over each week goes into a strongbox which is cash I keep for transport, clothing, emergencies, etc, this money always gets used, I can never save anything which would suggest my payments are set right.
I don't have any expensive habits, I don't smoke, rarely go out, can't afford holidays abroad, nevertheless I am keeping my head above water and I do accept that I can't have any luxuries whilst in an IVA.
I would still take it badly if my payments were increased by £70/month.

[MelanieGiles]

You will need to justify the need to keep that extra money to your IP - if it is being spent on housekeeping, perhaps you ought to increase that allowance in your I&E and see if your IP accepts the increased costs.

[kalla]

Consumer Prices are down including the cost of mortgages but beware that this situation may change. Whether mortgage rates will increase in the next 12 months is very much a 8 horse race.

If the government stimulus packages work in 2009/10 then interest rates and inflation will rise to their norm. No, I wouldn't bet on it but I wouldn't bet against it either.As everybody have got their 2008 predictions wrong about everything to do with the economy I conclude that Experts don't know THAT they don't know or can't tell the future.

I feel that people paying less now on their mortgages now need to continue with their I/E levels as if they are still paying the same mortgage rate and save the surplus till the next review and then if its 'yours' to spent then you have a "winfall"

The self imposed IVA discipline in cutting expenditure can slip with a sudden spontaneous self declarations that the cost of living in up when it is in fact going down....and going down further in 2009.The cost of Gas and heating is WAS an issue but we are going into Spring time so that little 'excuse' wouldn't hang.

People need to be cautious in trying to keep their mortgage payment saving and use it elsewhere.I am sure some creditors will get rattled if IPs are not returning money when they should.

I mentioned in my previous posting that reviews of Income and Expenditure in 2009/10 is going to be 'FUN' for both IPs and debtors.And from what posters are saying the hype has already began

[David Mond]

You are obviously spending this £70 (surplus) every month. As Melanie says re-visit your I&E to ensure every conceivable item is included which would presumably indicate in reality you have no surplus.

As regards interest rates - well having been through the 1973 and 1989/90 recession my belief is that interest rates will remain low for quite some time and it might be appropriate for anyone who can lock in a long term mortgage with this current low interest rate to do so if they can. Low interest rates won't last forever - my guess 2 to 2.5 years. Gordon Brown and his gang have not got a clue - but any change in Government will require an uphill struggle in getting spending down and living within our means - as to persons who have over stretched or taken out more credit when banks/credit companies were offering ridiculous deals- they to have to try and live within their means- not easy I accept. Good luck from me and hope you can get your IP to accept the level of expenditure you are actually incurring.

[northumbrian69]

My big worry is my payments go up then all of a sudden interest rates and prices rise again, this happened in 2007/08 and resulted in my 'surplus income' reducing to less than the amount agreed in my IVA, I'm sure I'm not the only one..
The big problem seems to be, it's very easy to increase IVA payments, you inform your IP that you have more money available and increase your payments immediately, this same mechanism doesn't seem to apply when you have less money available, you either tighten your belt which is very difficult, or ask for a variation meeting.
I'm no expert but this is the way it seems to work [:(][:(]

[kallis3]

Isn't that the way with everything though? Look at the interest rates - they came down drastically but not everyone has benefited, and most of those that have, haven't had the full amount.

As soon as they go up again, within 24 hours all the mortgage lenders will have put their rates up again and start charging the full amount immediately.

It's sheer greed on their behalf.