They just don’t seem to match recent price increases. On the front page of the Telegraph’s business section today there are details of inflation and it appears to be running between 4.4% and 5.3% but how on earth do they come to that when gas and electric have gone up 35%, water is going up similarly, food is going up 13% (although I may be wrong on that depending on where you shop I suppose), fuel fluctuates daily etc.

Have any of you been able to remortgage recently? There’s another major hit to your pocket (if you can get a remortgage that is).

The thing is that previously, before the downturn in the economy, and the arrival of the recession (sorry, not quite yet but mark my words, recession very soon) the good times rolled. We binged on credit to buy luxury items and now, with rising prices we look like we will be binging on credit for basic living needs – however will credit be still available?

Prices are rocketing, wages are decreasing (in real terms) we can’t remortgage for better deals, credit card and loan debts can’t be readily consolidated by remortgage as home prices plummet. It is grim reading ……

Mortgage fees have in most instances doubled and in other instances there are uncapped fees.  One lender gives a maximum £500,000 lend which would attract £12,000 in fees.

When you are remortgaging, if you can, you really want to pay the fee and not add it to your loan.  For example if you took the maximum loan of £500,000 as mentioned before, you would pay £25,940 for the fee at the end of the term.

There are 116,000 people per month coming to the end of their fixed mortgage deals who are going to be faced with a nasty shock when they see the revised rates.  Some will even experience a negative equity position.

If you are remortgaging to consolidate debt you may have left it too late as many lenders have withdrew the majority of deals following the onset of the credit crunch.  Debt advice is crucial before remortgaging to consolidate debt.  If you are just remortgaging because you have completed the end of the fixed mortgage and, will be paying your debts separately you will drastically need to review your financial position.

In the Times on Sunday there was this interesting article ……

TENS of thousands of Northern Rock borrowers face being trapped in mortgages charging punitive rates of interest following the bank’s nationalisation last week.

About 175,000 borrowers are thought to have been lured into Northern Rock’s controversial 100%-plus loans over the past few years. They are now likely to find it extremely difficult to remortgage after most lenders pulled out of the market last week.

If they stay with Northern Rock, however, they face a huge “payment shock” with repayments likely to go up by as much as £2,000 a year (£166 per month) on a typical loan of about £150,000.

The nationalised bank already has one of the highest rates of repossessions of any lender, and the plight of the 100%-plus borrowers could make matters much worse.

While some were cash-strapped first-time buyers, many others thought the ability to borrow up to 125% of the value of their property was simply too good to miss.

Jamie Lyall, who lives in Newark, Nottinghamshire, and works for a leading high street retailer, borrowed 104% from Northern Rock in July last year. “My wife and I could have put down a deposit, but the Rock deal enabled us to put the money towards an extension,” he said.

“We are now racing to pay off as much of the loan as we can to improve our remortgage options. However, with our second baby on the way this could prove difficult.”

House prices in his area have been flat, so the family are in danger of sliding into negative equity. Unless they pay down their debt, most lenders will baulk at their business.

Ray Boulger of broker John Charcol said: “The government is in effect a negative equity lender, while borrowers who owe more than the value of their homes are left with few options as their chance of remortgaging onto another 100% plus deal is slim.”

Northern Rock pulled its range of 100%-plus loans for new borrowers last week in response to heavy criticism from MPs. Alliance & Leicester, Coventry, BM Solutions, Bradford & Bingley and Cheltenham & Gloucester did the same, leaving limited options for those who have borrowed more than the value of their property.

Mortgages up to 95% are also disappearing fast. Alliance & Leicester, West Bromwich, Britannia and Barnsley building societies have all reduced the maximum they will lend from 95% to 90% of the value of the property.

Brokers said it would not be long before borrowers need a deposit of at least 10% to get a decent rate. Melanie Bien of broker Savills, said: “Aspiring homeowners as well as remortgagers could soon need equity of at least 10% to find affordable deals as the combination of the credit crunch and falling house prices has forced lenders to readdress their attitude to risk”.

Ian Peace, 38, from Huddersfield, West Yorkshire, succumbed to a 115% mortgage with Northern Rock a year ago at a rate of 5.75% fixed for two years. He said: “We were desperate to move and the loan from Northern Rock allowed us to take a lower price on our previous property. I am now extremely worried that I will be stuck with Northern Rock.”

Northern Rock’s 100%-plus range was structured so only 95% of the loan was secured on the property with up to £30,000 as a personal loan – so if the property was worth £100,000, you could borrow £125,000, or 125%.

Peace, who is married and has two children, borrowed 95% of a property worth £144,000 – of £136,800 – plus an additional £28,200. This added up to £165,000, or nearly 115% of the value of the property.

When he comes to remortgage, he may find he is stuck with Northern Rock. However, the best rate available from the bank is 7.58%, giving repayments of £1,225 compared with his current outgoings of £1,038 – an extra £2,280 a year. He could switch just his 95% secured loan to another lender, but Northern Rock would reserve the right to charge him 8 percentage points on top of the standard variable rate(SVR) on the personal loan element. This is now 7.59%, so he would be paying a punitive 15.59%.

The Times on Sunday 24 February 2008

What people don’t know is that they can restructure their unsecured debt by proposing an IVA. The IVA will ring fence unsecured debt and you will only have to pay your mortgage, and an affordable monthly payment to creditors.

Essentially, the deals people took out have changed and in most cases unaffordable. If this is you, don’t struggle on, get debt advice.

This is all well and good in a buoyant property market and when lending is cheap. However, when the lenders decide to withdraw products which allow remortgages over 75% loan to value (‘LTV’) and interest rates creep up, then remortgaging to repay debts is no longer a viable option.

There are in the region of 1 million people due to come out of the fixed rate mortgages in the coming weeks. Their monthly mortgage payments will sky rocket. Christmas spending is set to be at a record high with the majority of spending on credit cards. Banks have cut interest rates marginally but this will not repair the damage done by the credit crunch.

When the first credit card bill hits in the New Year it is essential you get good debt advice.