The Mortgages to Go for in 2012; Jeremy Gates Looks at the Nation's Money Issues and Investigates the Best Mortgages to Get Homebuyers through an Expected Rocky 2012

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Grim warnings from lenders of a sharp jump in repossessions in 2012 is a timely reminder to millions of homeowners to put secure mortgage arrangements in place ahead of a bumpy year on financial markets.

With an estimated 166,000 mortgages in arrears by 2.5 per cent or more, the Council of Mortgage Lenders (CML) fears rising unemployment could cancel out the benefits of low rates and send repossessions soaring to 45,000 - against 37,000 this year and 36,000 in 2010.

While there were plaudits for Prime Minister David Cameron for exercising his veto at the Brussels summit, the eurozone's possible drift towards a break-up could be about to make life tougher for homebuyers.

Mortgages, in a few months' time, could cost significantly more than they do today.

Ray Boulger, of mortgage broker John Charcol, said: "Problems could be even worse if the eurozone crisis comes to a head quickly.

"The cost of new borrowing is shooting up because of discord in the banking systems.

"That Brussels meeting, and subsequent admissions by other national leaders that it could be a struggle to make the deal agreed actually stick, suggest the crisis may be moving into its final stages."

Europe's banking system is under immense pressure; as banks find it harder to raise money on the wholesale markets, the cost of mortgages is already rising.

David Black, banking expert at financial data specialists Defaqto, said: "In the past month, rates on selected products have been increased by Accord Mortgages, BM Solutions, Halifax, ING Direct, Mortgage Trust, Northern Rock, Paragon, Platform, Santander and Scottish Widows Bank."

Most changes, however, affect new customers, rather than existing ones.

Boulger adds: "As the cost of new borrowing has shot up, rates on many new tracker and short-term fixed-rate loans have risen by about 0.5 per cent over the last couple of months, with some lenders increasing rates five times, albeit by small amounts each time.

"A Woolwich loan with a 90 per cent loan-to-value limit has seen a rise of 0.9 per cent."

Most increases so far have not been large enough to deter many still keen to buy, and, of course, mortgage rates remain amazingly low by historical standards. But this could change in the New Year.

For months, canny homebuyers have dodged the storms by sitting tight on standard variable rate mortgages when fixed-rate loans expire.

"If your standard variable rate is under three per cent," said Mr Boulger, "you might as well stay put. But many standard variable rate mortgages are in the 4.50-6 per cent bracket, including Northern Rock at 4.79 per cent. In that case, if you have 15-25 per cent equity in a property, check out other possibilities."

After peaking at pounds 363 billion in 2007, gross mortgage lending fell off a cliff and by 2010 was down to pounds 136 billion.

Remortgage activity has fallen even further than mortgages to finance a purchase, but gross lending could end up being slightly higher in 2011, at around pounds 140 billion.

However, there are significantly more mortgages available to buyers with only a 10 per cent deposit than a year ago, including an innovative Saffron Building Society deal at 95 per cent. …