The mortgage market in the United Kingdom is considered one of the most innovative and viable in the world. Compared to other countries, intervention in the market by state-funded entities and borrowing is controlled by either mutual organizations or proprietory lenders is limited or none at all.
The market got deregulated with important and essential innovations and differences in methods to attract borrowers since 1982. This has lead to a wide range of mortgage types:
The money market as well as deposits became the chief source of funds among lenders. As such, most mortgages returned to a variable rate, either the lenders standard variable rate or a tracker rate, which was to be linked to the underlying Bank of England repo rate (or sometime LIBOR). To attract new borrowers, an incentive deal was initially offered.
A fixed rate. Rate of interest does not change for a specified period of payment ranging from 2 to 10 years. Longer term interest rates are more expensive compared to shorter term rates of payment.
A discount rate. A margin of reduction is in place for a given period typically 1 to 5 years in a standard variable rate. The discount is sometimes declared as a margin over the base rate and sometimes stepped.
A cashback mortgage is a mortgage where the lump sum is typically a small portion of the advance
A capped rate. Rate of interest cannot be more than the cap but can change beneath the cap. A collar is coupled with a minimum rate imposed. Rates are often similar to a period equal to a fixed rate.
The lender may be offering a lower rate than the market cost of the borrowing with each incentive. If the borrower repays the loan, a penalty is imposed on the borrower. This is referred to as redemption penalty or tie-in, however they have been referred to as early repayment charge with the regulation of the Financial Services Authority.
UK Mortgage Process
A chartered surveyor is paid a certain fee, called valuation fee, for visiting the property and ensuring that is enough to cover the amount of the mortgage. Since it is not a full survey, all the defects that a house buyer needs to understand cannot be identified. A contract is not formed between the surveyor and buyer, so the buyer can sue the surveyor if no major problem has been detected. A building survey can be carried out by the surveyor for a cheaper fee.
John Mussi is the founder of Direct Online Loans who help homeowners find the best available loans via the http://www.directonlineloans.co.uk website.
