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Loan repayments on annual review mortgages to jump

7 December 2004

Mortgage borrowers whose home loan is reviewed on an annual basis have been warned they may face a sharp jump in their mortgage payments next year.

With four interest rate rises this year, mortgage broker Charcol has said borrowers could see their interest payments rise by around 20 - 25 per cent as lenders calculate the annual increase for the year ahead.

For a mortgage of £100,000 those on annual review could find their monthly interest payments rise by £83, equating to £1,000 a year, or more if they are with one of the many lenders who have increased their interest rates by more than the Bank of England base rate.

Ray Boulger, senior technical manager at Charcol, commented: "There are still many borrowers in the UK who have their mortgage structured on an annual review basis.

"This means any interest rate changes over the course of the year are amalgamated and applied to the mortgage at the start of each New Year.

"As payments will have been calculated on a lower interest rate at the start of 2004, borrowers on annual review will have a shortfall to make up next year."

He continued: "Even those who are fully prepared for the leap in their mortgage payments would be foolish to not look at whether they are getting the very best value from their loan.

"Borrowers who do not have early repayment charges should contact their lender and ask what better deals they can offer, and then compare these deals with others in the market.

"Apathy on the largest financial commitment many of us will ever have just does not make sense."