Mortgage Lender wont let me get a new fixed rate due to arrears, forcing me to go onto a variable rate that is unaffordable

[ukubird]

Hey,

I currently owe about £242,500 on a mortgage, payments are about £1100 p/m, fixed rate coming to an end and the bank is not allowing me to get a new fixed rate. Interest rate is going to jump from 1.72% to 4.24%, costing me an extra £300 p/m in interest that I can't afford. There is also rumblings all over the news that the BoE will increase the base rate to 3%, which would result in my mortgage interest rate being something like 6.8% or £1780 p/m.Currently approx £5000 arrears that built up during COVID from being furloughed.

I've already spoken to a broker and I can't remortgage elsewhere due to the arrears, so my curent lender is going to end up repossessing if I don't keep up with the new payments, and it feels like a scheme trying to get more money out of me.

Is there anything I can do?

 

[arudaano]

@ukubird I work in this dept. I have posted a reply in your thread in legaladviceuk but will summarise here.

It's allowed. Please seek independent advice from stepchange and citizens advice. Make provider aware of situation and disclose any vulnerabilities such as mental health, critical illness etc. Consider term extension to reduce monthly payments. Any questions I am happy to answer.

 

[aa12345]

@arudaano Nothing very helpful to add other than StepChange are fantastic. It will change your life and not necessarily affect your credit. Don’t be afraid to ask for the help.

 

[bless0n]

@arudaano TIL you can be 5 months in arrears and not lose your home... how does that even work?

 

[kathleencalado]

@bless0n It’s because banks typically would rather not do it at all if it can be avoided. They make money from getting the loan repaid but a repossession is just expense for them too.

 

[bless0n]

@kathleencalado So what is the limit? 6 months? A year?

 

[kathleencalado]

@bless0n The moment you are in arrears there’s a risk of repossession but what I’m getting at is that it’s a last resort for the bank, they really don’t want to do it if they can avoid it. And this person is in arrears, they may well be paying their monthly payment but they are behind where they should have been at this stage. The risk they have now is the payment will go up and then they may not be able to make the payments again.

 

[arudaano]

@kathleencalado Minimum before the legal process can start is 3 months arrears or 1k debt, which ever is greater.

Eg. If monthly payment was 2k per month you would need 6k of arrears before we could start the legal process.