UK Mortgages - Mortgage Providers & Brokers

A mortgage broker is a company or licensed individual or who obtains a mortgage loan for a Borrower by choosing the most appropriate mortgage at the best available rate. To become a mortgage broker ,there are special qualification and insurance, requirements.

Brokers arrange mortgage deals rather than lending you the money directly; in other words, they source a mortgage for you. A mortgage broker’s connections to many lenders can mean a richer portfolio of mortgage products for you to choose from. You should consider contacting more than one mortgage broker as some are better than others.

Firstly

Before you rush off to the lender with the lowest interest rates, your first port of call must be to your current lender. This is the path of least resistance and may eliminate some of the charges and fees outlined above. There may be some fees, but it's unlikely you'll have to pay for a valuation or stump up for legal fees. Chances are, though, that your current lender will not be too keen to offer you its most appealing products. These are normally reserved for new business (that's loyalty for you!). Expect an offer of perhaps 0.5 per cent reduction in your current interest rate. Don't accept it. If you can't secure one of your lender's best deals, take your business elsewhere. Let's face it, all lenders need borrowers.

How do you choose?

With hundreds of lenders in the marketplace, and hundreds more products available, choosing the right low-interest-rate product looks, on the face of it, rather bewildering. Don't be daunted. This chapter will focus on your specific requirements to help narrow the field and enable you to get the most suitable and cost-effective deal for yourself.

Your financial position

Before you look at any of the low-interest products on offer, you'll need to review your current financial circumstances. This will determine what deals are available to you. If you're 'prime' (that is, you've never missed a mortgage payment or personal loan payment, you've plenty of equity in your home, good salary prospects and so on), lenders will fight for your business and you'll have access to the best rates.

At the other extreme, you may be 'sub-prime'. This refers to your credit history; you may have missed the odd mortgage payment, or had a county court judgment (CCJ) against you. The amount of time that has elapsed since you cleared your debt will determine what products you have access to.

Budgeting and assessing risk

At the same time, you'll have to examine your current outgoings and your attitude to risk. Locking yourself into a long-term fixed rate means you'll know for certain what you'll be paying over the low-interest period. This is ideal for budgeting; but there's an associated risk. If interest rates drop below the fixed level, you'll be paying more than you need to. And getting out of the deal can be costly. Of course, nobody has a crystal ball as to what future interest rates will be. But it is possible to take an objective look at whether interest rates will rise or fall during the period of your deal.

Take, for instance, returns quoted for endowment policies. These are now quoted between 4 and 8 per cent, compared to 7.5 and 12.5 per cent not so long ago. Why? Because the Personal Investments Authority (PIA) is now very sensitive to accusations of mis-selling (remember pensions?). Life assurance companies are now required to be realistic with quoted returns on endowment policies relative to the future economic climate. This is a clear indication of how the financial services industry perceives future economic growth.

Additionally, the government has handed over the reins to the Bank of England to set interest rates. Apart from sidestepping any blame should interest rates cause problems in the economy, the government retains the right to apply pressure on the Bank of England when it suits it. This is good news since the government is intent on joining the European single currency in 2002. When this happens, the European Bank rather than the Bank of England will set interest rates. With mortgage interest rates in Europe at around 5 per c.ent (at the time of writing), it's understandable that the government will be anxious to gradually reduce interest rates (that is, apply pressure accordingly) to avoid potential economic catastrophes at that time. This is to everyone's advantage - with the exception of savers!

So, with interest rates predicted to be low in the short to medium term, your next task is deciding on the type of deal most suited to you. This requires some understanding of how the products work and the pros and cons of each.

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