Fixed rate mortgages

Fixed rate mortgages are popular, particularly with first time buyers, because your mortgage rate is fixed for a set number of years. The term is usually 2, 3 or 5 years but sometimes 10 years. You know exactly how much you’ll be paying each month for that length of time, regardless of what happens to interest rates. The downside is that you’ll be stuck on a higher rate if other mortgage rates go down. You can get out of a fixed rate mortgage but there’ll be an early repayment charge to pay for switching before the end of the period.

When the mortgage comes to an end, you’ll be put on the lender’s standard variable rate (SVR) which will probably have a higher interest rate than you’ve been paying. In that case you can apply for another fixed rate deal.

Variable rate mortgages

Every lender has a standard variable rate (SVR) mortgage. This is their basic mortgage. The interest rate goes up and down as mortgage rates generally change. They are partly influenced by the Bank of England base rate but other factors come into play as well. The interest rate you pay on an SVR mortgage can change even without base rate moving. Similarly, the base rate might come down but your mortgage rate might stay the same.

Tracker mortgages

Tracker mortgages move in line with (i.e. they track) a nominated interest rate which is usually the Bank of England base rate. The actual mortgage rate you pay will be a set interest rate above or below the base rate. When base rate goes up, your mortgage rate will go up by the same amount. And it’ll come down when base rate comes down. Some lenders set a minimum rate below which your interest rate will never drop but there’s no limit to how high it can go.

With base rate at 0.5% and an add-on rate of 1.5%, your mortgage rate will be 2%.

‘A Foot On The Ladder’

The advantage of this arrangement is that the purchaser can gain a ‘foot on the housing ladder’ when they might not be able to afford to buy a property outright. If the value of the property goes up, then their ‘stake’ also goes up. In the past, many of our clients have sold their shared-ownership properties and used any gain in equity to place a deposit on a home, which they can purchase without having to share ownership.

In-House Expertise

We are fortunate at Clifford Davis to have Emmanuel Folivi on our team, who has extensive knowledge of different housing associations and their various shared-ownership schemes. We will guide you towards the lenders who are most comfortable with this type of lending and walk you through the process of getting the keys to your new home. If you have a question about getting a shared-ownership mortgage or remortgaging a shared-ownership property, contact us today.