How do you protect against interest rate rises without remortgaging?

Published ¤ 13/10/2010 14:27:46

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Nobody knows when rates will rise. Neither the Bank of England nor the market commentators predicted they would fall back in 2008. And with property prices predicted to fall further over the next year or two, remortgaging may become very difficult for some.

Bank of England Base rate graphSo, what can you do if you are effectively "trapped" with your current lender, and unable to remortgage, or if you are enjoying a very low variable rate, and do not want to remortgage? An interest rate cap, or interest rate insurance, offers a real alternative. At PKS we can effectively cap your mortgage payments without the need to remortgage and with no reference to LTV, income, or credit status.
An interest rate cap, or interest rate insurance, provides an upper limit on any Bank of England interest rate rises. If the bank rate rises above your chosen cap, you will receive payments according to the size of your mortgage.
For instance, if you have a £200,000 interest only mortgage, tracking the Bank rate plus 2% (such as Nationwide or C&G variable rates), your current monthly payments will be £417. If you choose a cap of 2%, and the Bank rate subsequently rises to 5%, your mortgage payments would rise to £1,167. However you would receive payments of 1/12th of 3% of £200,000 each month for the remainder of the term of the plan, equivalent to £500 per month. This would be equivalent to capping your mortgage at 4%.
These types of plan are particularly useful for those people that are enjoying a very low variable rate at the moment, and for some reason cannot remortgage onto a fixed rate. It could be due to credit problems, or perhaps too little equity in the property. These types of plans offer a real alternative to those people "trapped" with their current lender.
Remember, these plans are NOT dependent on income, credit status, or LTV, so, if you would like to discuss your options with us, or if you would like a no-obligation quote, please call us on the number above. We offer "truly" independent advice.

PKS is authorised and regulated by the Financial Services Authority in respect of mortgage and general insurance business only.
Registered address: 10 Addison Gardens, Odiham, Nr Basingstoke, Hants RG29 1AS
Your home may be repossessed if you fail to keep up repayments on your mortgage.
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