The Mortgage Clinic: How do I escape from Northern Rock's SVR?


I bought my flat days before the Northern Rock crisis, on a 4.89 per cent fix with the same bank that ends in October. I have 60 per cent equity in the flat, but my mortgage is seven times my income. However, I am due a pay rise – would I qualify for Woolwich's lifetime tracker or should I resign myself to the 7.49 per cent Rock SVR? PS, by email

Northern Rock's near-collapse continues to cast a long shadow, especially for borrowers like you, who face a mighty jump in repayments at the end of a cheap deal.

Last week, research from the analyst Moneyfacts found that the average two-year fix had crept up to 7.07 per cent. So anyone coming to the end of a three-year fix and looking for another one could expect to pay another £158.23 monthly (per £150,000 slice of a mortgage) – that's an extra £5,896.28 between now and 2011.

Your particular circumstances, however, point to a brighter outlook, although the jittery British mortgage market could mean you may struggle unless you move quickly to bag a deal.

First, your chunky 60 per cent equity stake should find favour with rival lenders, according to Andrew Montlake, of broker Cobalt Capital. "While much has been made of the mortgage malaise and the difficulties of remortgaging for some, the reality is that quality applicants should not have much of an issue and still have 1,000 or so products to choose from."

Add your unblemished credit rating to the mix, he adds, and the Woolwich lifetime tracker at 5.74 per cent should be within your grasp, as is Cheltenham & Gloucester's "Fair Weather Mortgage" tracker, which, at 5.99 per cent, "is competitive and allows you to switch to a fixed rate at any time without penalty".

Other advisers, however, are less sanguine about your position – a particular concern is that your income multiple is still very high. "Let's not pretend that the landscape hasn't altered dramatically," says David Hollingworth, of broker London & Country. "Although you don't say what your salary is, even at the reduced multiple of 5.5 times income, it could prove difficult to find a lender keen to lend that amount."

To this end, in the short time available and savings permitting, he suggests "overpaying as much as you can on the remaining cheap rate". Ray Boulger, of broker John Charcol, says it's also worth noting that Lloyds TSB has recently struck a special deal with Northern Rock to offer home loans to existing customers such as you, as long as you meet the criteria. Although it has yet to announce what rates it will offer, keep an eye out for these, because they could offer a cheaper alternative.

Send us your questions and you could receive £50 to spend at Amazon

Foxed by jargon? Worried by the credit crunch? Email a question to mortgageclinic@independent.co.uk. We will not reveal your identity, and we cannot give specific advice. If your question is printed, you'll receive a £50 voucher from Amazon.co.uk, so you can kit out your home with anything from a lawnmower to an espresso machine. www.amazon.co.uk/homeandgarden

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