Borrowers face a tough time in 2008

Published: December 05, 2007

Homeowners with short-term fixed rate mortgages set to expire next year may find it difficult to find an affordable deal, according to the industry watchdog.

As many as 1.4 million borrowers are likely to come to the end of their fixed rate mortgages in 2008, the Financial Services Association (FSA) claimed, and the tighter lending conditions will make it harder for them to secure a favourable new mortgage.

Speaking at the Council of Mortgage Lenders' annual conference, FSA retail managing director, Clive Briault, warned that those currently holding sub prime mortgages could be particularly badly affected.

"Many of these borrowers are on relatively high loan-to-value ratios or income multiples and will find it difficult (if not impossible) to refinance their mortgage on favourable terms, which will leave them facing a significantly higher interest rate on their borrowings, which may prove too much for many of them to afford," he said

"Moreover, sub-prime borrowers may not have access to the market at any price, at least until the normal market mechanism of risk-adjusted pricing returns," he added.

As a result of the potentially difficult situation, Mr Briault called an examination of the line taken by lenders towards homeowners who defaulted on their mortgage payments.