UK Mortgages

By: Michael Hatfield


UK mortgages are funded entirely by credit unions, banks and other financial organizations. The market for mortgages in UK is very competitive, which has led to a variety of mortgage products that are available for borrowers in the country.

Most of the UK mortgages operate on variable interest rates, generally determined by the Bank of England. As the market is very competitive, lenders often offer the borrower certain terms when they are able to pay the rate which differs from the variable rate. Sometimes, lenders offer their borrowers a fixed interest rate for a specified period of time, before they need to start paying for the variable interest rates. Among such things, another common incentive is the discounted rate.

A discounted rate is such a rate which is lower than that of the variable rates. These discounted rates are applied for a specified number of years, which are established by the lenders. These offer true saving without any hidden charges, which means that the interest saved is not added to the loan.

Some lenders in UK offer capped rates for mortgages, having the maximum interest rates which the borrower is required to pay at any time within the term of the loan. In case of capped rates, there are many early repayment charges. It basically has higher interest rates than those of comparable fixed rates.

At the same time, some lenders offer cash back incentives that are based on the percentage of the amount borrowed from the principal. For example, borrowers who took almost $100,000 with the 5% cash back incentive, will receive around $5000 at the end of the mortgage. These are mainly designed to pay the percentage of the loan after its completion and are usually linked to the variable rates. But from here budgeting can be difficult as early repayment charges are applicable. Cash back should be repaid if the mortgage is redeemed within the period of early repayment charges.

To meet the different needs of lenders in UK, they offer various competitive rates. These rates usually have pre-payment penalties. It means that the borrower is required to pay a certain amount of money, if they pay the mortgage off prior at the end of the term of the loan.

Self certification is another common type of mortgage. Such UK mortgages are for those who are employed but with no proof of their income. Till the borrower gives a down payment and borrows an amount which is lower than the amount of the home, the lender can offer them a self certification mortgage. Such mortgages generally have higher interest rates than those of normal mortgages. This is because of the amount of risk is involved in this for the lenders.

Another common type of mortgage in UK is tracker mortgage. Basically it tracks the base rate of the Bank of England which has a specified percentage for a certain period of time. One can benefit from it as the base rate decreases.

UK mortgages are of different types, each having its own pros and cons that helps a broker to deal in them.

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