Those still trying to pay back their adverse credit loans are finding it nearly impossible to do so, thanks in a large part to rising interest rates. Home values are continuing their downward slide and in many cases, homeowners with adverse credit loans are now facing a negative equity situation with their homes. Until the interest rates on variable adverse credit loans come back down, this problem is expected to continue, especially with the current state of the economy and the UK housing market. Refinancing may not be the answer for many either, since the rates for these are going up as well.
“The repayment shock for those attempting to refinance two-year fixed mortgages is now huge. They are paying on average 163 basis points more than when they took the mortgage out,” said George Buckley, chief UK economist at Deutsche Bank.
He continued, “This is a very significant rise that will reduce demand both for new mortgage finance and remortgaging. There is bound to be a knock-on effect on house prices.”
Howard Archer, an economist with Global Insight added, “Severe downward pressure on house prices continues to come from very weak housing market activity, elevated affordability pressures on potential house buyers and very tight credit conditions.”
Related reading: Adverse Credit Loan
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