The recent news from the mortgage market with home sales up 40% in March is positive indeed and offers a glimmer of hope that the current recession is nearing an end. With the end of the recession, though, interest rates will likely be on the rise.

Nationwide is also reporting that the slide in house prices seems to be levelling off somewhat which is good news for those waiting to sell their homes.

Borrowers are still presented with a problem in the stricter lending criteria for mortgages. They have less equity in their homes than they once did and many of them are facing financial difficulties due to the high rates of job losses. First time home buyers are still not in a position to buy.

There are millions of homeowners in the UK who have a mortgage in place and have benefitted from the lower interest rates. Those with variable mortgages or those that have interest rates that fluctuate with the rates posted by the Bank of England have realized tremendous savings in the past few months in lower mortgage payments. However, financial experts predict that fixed rates will soon start to rise and that now may be the best time to lock in at the low rates.

According to Arieh Zucker of the mortgage brokerage, Windfall Finance, located in West Sussex, “‘Borrowers are enjoying their low tracker or standard variable rate (SVR) mortgages, but they could come to regret their complacency in the not too distant future.”

He goes on to say, “‘Fixed rates may not look so hot in comparison, but it is unlikely they will fall much lower and borrowers stand to lose if they wait too long to act. If property prices continue to slump, borrowers are only making their position weaker for when the time comes to remortgage. This could turn to panic if interest rates suddenly spike up, as happened in the last recession.”

Locking in at a fixed rate for a longer term could pay off for homeowners in the dividends they can earn. Richard Morea of the Bath broker, London and Country Mortgages states, “The difference between two and five-year fixed rates is small. Borrowers who are comfortable locking into a rate for longer should look at five and even ten-year fixes. Most mortgages are portable so it shouldn’t restrict you if you need to move house. A long-term fix provides stability at a time when interest rate changes could be volatile and extreme.”

It is best to shop around to see which lender offers the best fixed interest rate. Many of them do not require you to make the decision immediately and allow you up to three months to decide whether or not you want to take this step.

In order to receive these deals, though, you so have to start planning early because most do require that you reserve the rates three to six months in advance of making a purchase of a home. Take a look at your current mortgage to see when the term ends. If it is within six months, you should start talking to your lender now about locking in at the present rate of interest.

Those homeowners with low tracker rates can afford to wait a little longer. During the time it takes for the interest rates to rise they will realize large savings on their repayments. By continuing to make the higher payment each month that you initially started off with, you will overpay your mortgage and thus pay off the loan sooner than you expected. This is especially true if there is no large exit penalty attached to your mortgage, but you still need to keep a close watch on the interest rates.

Melanie Bien, director at the mortgage broker, Savills, advises, “If you’re not tied into your mortgage rate you could stay on the low variable rate for as long as possible and then move to a fix when you feel rates are going to rise.” She also adds, “Of course, this strategy depends on your attitude to risk. If you can’t afford a significant jump in the base rate it makes sense to fix now. Historically, the base rate at 5% is more likely than the current 0.5%.”

Is it a Good Idea to Lock in Your Mortgage at the Lower Rates Now Available? is a post from: Glitec Loans

However, with the base rate having plunged and expectations of further rate cuts many are now looking towards standard variable rate deals so that they will benefit from further rate cuts.

The Nationwide Building Society has recently reported that one third of its home loan customer base, which stands at around 1.4 million in total, are now on the lender’s standard variable rate. The interest rate on the lender’s standard variable rate mortgages is set to fall to 3.5 percent as of the start of February.

An official from Lloyds TSB also said that an increasing number of its borrowers were turning to the bank’s standard variable rate mortgages, stating: ‘We have seen significant numbers of our borrowers moving on to and staying with our SVR to take advantage of how low it is at the moment.’

In the past consumers have been warned against opting for their lender’s standard variable rate mortgage deals over other mortgage deals as the interest rate on these has been far higher than other mortgage options in many cases.

However, with the base interest rate having fallen to the lowest level of the history of the Bank of England, which spans over three hundred years, and with further base rate cuts expected, many borrowers now want to try and cash in on the savings and enjoy lower rates of interest from lenders that are passing on the base rate cuts.

More people turning to variable rate mortgages is a post from: Glitec Loans

On a brighter note the building society did add that the recent interest rate cuts applied by the Bank of England would help to ease the financial pressure on many homeowners in terms of their repayments, as it would mean that many people on variable rate mortgages would have far less to pay each month on their mortgages, thus leaving them with more disposable income.

The lender has cut back on lending over the past year, and has been focussing on lower risk lending given the financial climate.

An official from Nationwide said: “We understand borrowers’ concerns regarding the availability of affordable mortgages. Our principal focus at this time will be our existing members and in continuing to play our part in supporting the first time buyers’ market. We are committed to offering good value mortgages underpinned by a focus on prudent and sustainable lending.”

He also said that considering the difficult financial climate and turbulent money markets the building society had managed to maintain a solid performance.

He stated: “Our resilience proves that the building society business model can be particularly effective during turbulent market conditions.”

House prices may continue to fall in 2009 and 2010 is a post from: Glitec Loans

Most lenders will offer you the choice of either a fixed or variable rate mortgage based on your credit and eligibility, but before you make your decision you should make sure that you learn more about these different mortgage types so that you make the right decision. Your circumstances, needs, and budget will help you to determine which of these mortgage types is best suited to your needs, but it is also a good idea to look at movements with the base rate and whether the base rate is more likely to fall or rise, as this may also impact upon your decision.

Variable Rate Mortgages

A variable rate mortgage is a mortgage on which the interest rate can fluctuate in line with the base rate, so your interest rate could go up or down, which means that your monthly repayments could also go up and down. This can make it difficult to budget if you are on a tight budge wit little leeway for fluctuation, which can put some people off. It is also not great news when the base rate is on the up, which is something that has affected many homeowners over the past year and a half following the series of six interest rate rises applied between August 2006 and July 2007.

On the upside when the base rate is falling the interest rate on your variable rate mortgage should also fall, and therefore your monthly repayments should fall. Many experts are predicting that the base interest rate will fall a number of times this year, and with this in mind many consumers may decide to opt for a variable rate mortgage. Also, the initial rate that you get on a variable rate mortgage is generally lower than the rate at which your fixed rate mortgage will be set.

Fixed Rate Mortgages

A fixed rate mortgage is a loan that has a fixed rate of interest for a specified period of time. These loans have proven popular amongst many first time buyers who do not have experience in budgeting matters and who want to enjoy static repayments for a period of time in order to benefit from easier budgeting. The most common fixed rate periods are for two or three years, although you can get them for five, ten, or even twenty five years. With these mortgages your rate is fixed for a specified period of time, and during that term the interest rate will remain unchanged no matter what happens with the base rate, which means that your repayments will also remain the same throughout the fixed term.

On the upside a fixed rate mortgage means that if interest rates rise, as they have done a number of times over the past year and a half, your mortgage interest rate and repayment will not change during the fixed term. However, on the downside if interest rates fall, as many experts are predicting that they will over the coming year, you will be paying the higher rate, as your repayment and interest rate will not fall during the fixed rate term. You will also find that the initial rate at which your mortgage is fixed is higher than the standard variable rate at that time. At the end of the fixed rate period your mortgage rate will revert to the lender’s standard variable rate.

Fixed Rate or Variable Rate Mortgage is a post from: Glitec Loans

What’s out there?

To start with, what sort of mortgage hunter are you and what are you looking for? If you are one of a group intending to take out a joint mortgage then your choices will be limited, but you will be able to find a lender and you will be able to find one that will allow a mortgage to be held in joint names by up to four people. The amount of such a mortgage will be calculated on three times the highest salary plus one times each of the other’s incomes. In today’s market you had better hope that at least one of you has got a really well paid job!

Repayment or interest only

Fundamentally there are two main types of mortgage: they are either repayment, where you pay back the interest and the capital lump sum that you borrowed each month or interest only, where you just pay back the interest and use a policy such as a life assurance policy or another investment fund product to pay off the loan at the end of the mortgage term.

Circles within circles

Within these broad principles there are a whole host of options. It is the proliferation of these options, sometimes called different things by different lenders, that gives the impression there are a confusing number of types of mortgage.

Which of these options is best for you depends on your attitude to risk and on how much spare cash you have each month as well as whether you want to aim to pay off your mortgage early or not.

Standard variable rate

If you like your life to be varied then this one is for you. The monthly repayments will change periodically roughly in line with the changes by the Bank of England in the Base Rate of borrowing. Each lender will have a different standard variable rate of interest, so shop around.

Capped

A capped mortgage is one where the interest rate on the monthly repayments cannot exceed a certain amount, so if the Base Rate climbs you will be protected from the higher end of the rate by the ceiling on the product. This is a good mortgage to choose if you are working to a budget on your monthly finances. The capped period usually is only for a few years, maybe between 1 and 5, after which it will either revert to the standard variable rate for that product or it will change to a different capped rate.

If you have been paying much under the base rate while in the capped period, in other words your repayments have been at their maximum for some time then you might find when that period ends that you face quite a hefty increase in repayments.

You also need to be aware of any tie-in penalties and how long this tie-in period lasts once the capped period has ended. Many products have these penalties which are designed to stop you transferring to another product as soon as you have finished the offer period.

Flexible

Flexible mortgages will allow you to pay off more than the required repayments each month without penalty and will also allow you to under pay if you need to and will have the facility for payment holidays. Most will also calculate interest on a daily basis. Some of these flexible mortgages are also off-set mortgages which will provide you with a bank account so the mortgage becomes like a huge overdraft that you gradually pay off over the loan period.

Fixed rate

And finally fixed rate mortgages are for those of you who like to know exactly what’s going on in your life. These will enable you to accurately budget your monthly finances as the rate won’t change for the fixed period. However, as with the capped mortgage you need to be aware of any penalty payments that might be applied once the fixed period is over.

There are other types of mortgage out there and with such a variety to choose from it will only be a matter of time before you find exactly what you are looking for.

More Information:

• FSA mortgage information – free impartial advice on mortgages from the FSA

Choosing The Right Mortgage is a post from: Glitec Loans