That's absolutely right - planning can prevent a lot of problems. A couple (who are both in IVA's) that I saw recently had not appreciated until too late just how much their mortgage would go up at the end of the 'deal' period. The increase had made the ongoing IVA payments very difficult to make for a couple of months before the replacement arrangement was put in place.
There can be a difference between the way general interest rates for mortgages work, and the way they work for so called "sub-prime" mortgages. Most mortgages are linked to the Bank of England base rate either directly or via the lenders standard variable rate.
Many "sub-prime" mortgages are connected to the LIBOR which is the rate at which banks lend to each other. This is where the credit crunch has been felt as banks have wanted to hold on to their cash, leading to the rate going up. Partly because of this in a time of generally rising interest rates "sub-prime" mortgages have tended to be affected more than the average.
This adds to the need to plan; talking to a mortgage broker approximately three months before an existing 'deal' ends might be sensible.
Andrew Graveson
Independent Mortgage Broker & MD Bright Oak Debt Management
andrew@brightoak.co.uk
www.brightoak.co.uk
