Fintech startup launches ‘mortgage house trap’ calculator

Online tool shows if a homeowner faces the risk of paying huge mortgage repayments

Fintech startup launches ‘mortgage house trap’ calculator

Fintech firm Nous has developed an online calculator, which can show homeowners if they are at risk of being caught in an expensive ‘mortgage house trap’ if property prices continue to fall.

The app, which helps families manage their outgoings, is now featuring an online tool that allows people to enter basic financial details, such as their home’s value and current mortgage, to assess their potential risk.

The firm said the calculator will show the most likely outcomes in a personalised report and will supposedly allow users to prepare for the financial risks detected by the tool.

“If you bought a home with a high loan-to-value mortgage of, say, 90% in 2020, you would almost certainly have chosen a very attractive fixed rate deal at around 2.5 to 3%,” Greg Marsh (pictured), founder and chief executive of Nous, explained. “But if that deal ends next year, it is likely that the value of your home will have fallen by as much as 15%, and you won’t be able to shop around for another fixed deal or even get one with your current provider because you no longer have that 10% equity in your home.

“Your current lender won’t withdraw your mortgage, but you’ll be forced to stick with them on a standard variable rate, which is predicted in 2023 to be double the rate you were originally paying. And that variable rate could be as much as 1.5% higher than you would pay if you were able to shop around for a better fixed deal.”

Marsh said the Mortgage House Trap calculator will “allow you to look ahead and plan for the financial pressures you may face in the next 12 or 24 months so the mortgage house trap doesn’t take you by surprise.”