As human beings we tend to react to situations rather than pre-empt them. Due to favourable mortgage rates many mortgage borrowers are currently sitting on the Standard Variable Rate set by their bank. Now might be a good time to take some pre-emptive action, have a look at some of the best Remortgage rates around and take advantage of them while they’re still available.

We’ve Had It Good

Since the Bank of England dropped interest rates to 0.5% mortgage borrowers have been feeling the benefits of extremely low mortgage rates, especially those who were lucky enough to find themselves landed with a Lifetime tracker mortgage. Low rates have also benefited those people who are on Standard Variable Rates (SVR’s), these borrowers have also seen their mortgage payments drop from what they were previously paying on a fixed rate mortgage deal or at worst their payments have stayed the same. With such good outcomes for mortgage borrowers over the past few years, why would I suggest that now might be a good time to Remortgage?

The UK housing market seems to be in a very funny place at the moment. We have historically low interest rates, yet few buyers! We also have a glut of houses on the market but sellers are still reluctant to drop asking prices as most of them have mortgaged up to the hilt & can’t afford to sell. This has left those charged with getting the housing market going again with a real predicament. One intended solution that has recently been introduced is the government backed New Buy scheme.

The New Buy scheme allows developers and the government to join forces to help buyers secure a mortgage. I’ve seen many schemes like this in my time working in finance and I feel it’s important that people understand the potential pitfalls of these schemes so they don’t get caught out in the future!

If The Government Is Involved Something Is Wrong

It seems like common sense to me that if the government or developers themselves are having to lend professional couples money so that they can afford to buy their own house, something is wrong with the housing market. We have the lowest interest rates in modern times yet people are still struggling to buy a house! In the not so distant past it was normal practice for the majority of lenders to lend 3 times income on a mortgage, yet even with the recent drop in UK house prices many buyers are still having to borrow 4 or even 5 times income to be able to buy a house, and that’s if they can even get a mortgage. I feel Government Schemes like newbuy only serve to prop up an unsustainable market, allowing people to buy houses at prices that are above the true market value. I would also be asking myself what will happen to house prices if things don’t improve in the market and the government funding is withdrawn?

Tied to certain lenders

Another thing I don’t like about government first time buyer schemes like New Buy is the

If I was to offer you the chance to take a holiday from paying your mortgage for a few months would that sound attractive to you?

Many mortgage and loan agreements actually have this option built in. If this is the case you are often after a specified period of time, entiltiled to take a “holiday” of a month or more from paying your mortgage or loan. As attractive as this sounds is it really wise to take these payment holidays? What are the potential downsides to taking them?

Is it really a mortgage FREE month?

The first thing to realise is that a mortgage payment holiday isn’t exactly what it’s made out to be! The term ‘payment holiday’ makes it sound like you are getting something for nothing. It sounds like the mortgage lender has decided to let you off completely from paying your mortgage for a month or two. This is not the case at all!

When you borrow money by taking out a mortgage, you agree to make a monthly repayment on that mortgage every month. A good chunk of this payment is the interest you pay on the loan. No lender in their right mind is going to let you off paying the interest for a month as this is how they make their money! So if you’re not making the monthly interest repayment, how does it get paid?

In my Last Post Portable Mortgage? – Not as portable as you might think we discussed why porting a mortgage is not always as easy as it’s made out to be!

I also mentioned that you should be careful as some “Lenders” may actually want to cause problems for you when you want to port your mortgage! Why would they want to do this? They might do it for one of two reasons.

Portable mortgages are one of the least explained and most misleading features of a mortgage that I came across in my time as an advisor. I always tried to outline to clients exactly what the term “Portable” really meant. If you look at any of your mortgage documentation however, you will often only find a simple phrase:

“This Mortgage Is Portable”

It makes porting your mortgage sound so simple doesn’t it! The truth is in the majority of cases, especially since the credit crunch, it’s not that simple at all!