Mortgages have never been easy to work out for the average homebuyer. With so many different types of mortgage available and at so many different rates and periods, it's often been difficult to decide which mortgage is best. Recent months have seen the mortgage market in the UK exist in an almost constant state of flux; interest rates have risen, lenders have withdrawn large LTV mortgage products and many homeowners have turned to remortgaging their properties in search of better rates, while financial meltdown across the Pond in the United States has had serious ramifications for UK borrowers and lenders alike.
For many borrowers on variable rate mortgages, there is always a fear of dread while waiting for an announcement regarding the base interest rate - will it be cut, will it rise again, or will it stay at the same rate as last month? However, even after any announcement is made, the waiting cycle begins again as mortgage lenders then decide whether or not to pass on any cut in their own interest rate; although they are almost sure to pass on any rise, meaning that potential mortgage payments could increase quite drastically in the wake of any base rate changes.
One simple solution to combat fluctuating mortgage payments is to arrange a fixed-rate mortgage, and this appears to be an increasingly preferred course of action across the UK. Although it was recently claimed by the Council Of Mortgage Lenders (CML) that fixed-rate mortgages accounted for just over half of all home loans in January 2008, in comparison to three-quarters in July 2007, many lenders have reported a significant rise in fixed-rate mortgage arrangements. In fact, Abbey Mortgages claims that despite reports of further potential interest rate cuts, around one-third of homeowners would now opt for a fixed-rate mortgage if given the choice.
In the wake of economic uncertainty, those who have already bitten the bullet and opted for a fixed-rate mortgage previously can now enjoy a relatively stress-free repayment period, safe in the knowledge that regardless of which way the base rate goes, their mortgage payments will remain constant, thus helping them to budget better; while those on variable rate
mortgages live in fear of the continued uncertainty surrounding the unceasing and conflicting predictions of future base rates.
Remortgaging is nothing new although recent times have seen a large increase in the amount of remortgage lending in comparison to overall mortgage arrangements. The CML claim that while overall mortgage lending was down almost one-fifth in both volume and value compared with December 2007, the volume of remortgages increased by nearly half during the same period, with 85,000 remortgage deals being completed compared to 59,000 in December.
However, the turmoil surrounding the mortgage market appears to be much less profound north of the border. In fact, homes in Scotland have bucked the housing trend, and research by the Royal Institution of Chartered Surveyors (RICS) reveals that although the overall UK house price fell at a record level in February 2008, house prices in Scotland actually gained in value.
So those living in Scotland have a choice if they wish to fit in with recent trends: remortgage property with a fixed-rate deal, or sell up and take advantage of the high demand and better prices. But, whatever your situation, it is worth making sure your mortgage deal fits in comfortably with your personal budget and that, if yours is a variable-rate mortgage, you are aware that rates can go up as well as down.
And it goes without saying that consumers should consider all the options and compare deals before making such an important financial commitment.
