Standard variable rate mortgage agreements are potential ticking timebombs
As more and more mortgage promotions hit the market it is becoming ever more apparent that only those with perfect credit ratings and credit histories will have access to the better rates. Those who have been rejected for the lower promotional rates are likely to be moved towards a standard variable rate mortgage agreement but with base rates at just 0.5% there is little scope for anything but a significant increase in the longer term.
So those investors who are looking to acquire property in the current market could well be acquiring a potential ticking timebomb for the future as and when standard variable rates begin to rise. When you consider interest rates were around 5% before the recession began we could see a significant increase in the standard variable rate mortgage which will place more pressure on household budgets and potentially push more people towards financial distress. It will also reduce any significant short to medium-term growth in the UK property market and could slow a return to the "boom times".
There have been suspicions for some time that mortgage lenders in the UK are happy to grab the headlines with low mortgage rates when upon further investigation many of these agreements require significant deposits.
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