Is A Cheap Mortgage A Thing Of The Past?

Currently the mortgage market is offering less and less cheap mortgages as interest rates are slowly being cut by the Bank of England and the mortgage lenders are slow to follow suit. Initially this sounds like a good thing for mortgage repayments but the consequences are leaving many existing borrowers substantially out of pocket. As house prices are falling, the price of food and drink is drastically rising; meaning borrowers are having to spend more money on household and day to day items instead of repaying their mortgage. This also means that new buyers are subject to stricter mortgage terms and conditions, in an effort by the lenders to slow the alarming number of house repossessions from missed repayments or defaulted mortgages. Unlike mid-2003 when mortgage lenders were falling over themselves to offer cheap and variable rate mortgages and to sign up as many new buyers or capture existing borrowers as they could, the assessment criteria for mortgages are becoming very tight, which works to the disadvantage of new buyers and especially for existing mortgage borrowers who are looking to renegotiate their mortgage for a better deal; their previous outstanding loan will count significantly against them.

The easiest way to a cheap mortgage is to remortgage every so often, however timing this right requires expert mortgage advice and keeping an eye on how the mortgage market is doing. As mortgages are becoming a very competitive market, remortgaging is very popular. However, mortgage lenders are very aware of this and have dubbed serial remortgagers as 'rate tarts' and in order to combat this many have changed the small print on mortgages to impose heavy penalties.

Conversely with mortgages, often paying more can save the most money. Offset mortgages often have the highest interest rates and are only cost effective if the borrower has existing savings of around 20% of what they are wishing to borrow. Savings act as an interest buffer as the borrower only pays interest on the loan amount and so less interest is paid overall. As all debts are usually consolidated into the cheap mortgage, any credit remaining on the consolidated accounts also helps to lower the amount of interest paid as interest is calculated daily. The downside is that you will not receive interest on any savings used to offset the mortgage and if circumstances change then the high repayments may be too much of a financial strain. Yet as the old adage says: 'You need to spend money to make money'. Spending money on a mortgage can give the borrower the chance to consistently have a cheap mortgage.