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Homeowners face shock tracker rise - The Times

Hundreds of thousands of homeowners with super-low trackers face a payment shock of as much as £7,000 a year in the next two months — even as the Bank of England indicated last week that interest rates could remain at lows for some time.

Brokers are warning some borrowers to brace for a sudden rise in repayments of as much as £583 a month — or £6,996 a year on a typical £200,000 interest-only loan — as loss-making deals on offer in 2007 expire. Their rates could shoot up from 0% to as much as 3.5% if they default on to their lender’s standard variable rate (SVR). On a £500,000 mortgage, the payment shock would be £17,496.

However, Mervyn King, the Bank’s governor, said in last week’s inflation report that the economy could face a “slow and protracted” recovery with inflation staying low for the next two years.

Economists interpreted the report as indicating the Bank would keep interest rates at 0.5% until autumn next year. Brokers therefore said there was less pressure for borrowers to snap up a cheap fix.