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Standard Variable Rate Mortgage
It is only in recent times that clients have become aware of the value of a standard variable rate mortgage as their current deals with their existing lender come to an end they are often finding that they are better off going onto a standard variable rate than paying a very large fee and taking a discounted, tracker, capped, offset or fixed rate mortgage with their lender.
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More About Standard Variable Rate Mortgages
In recent times it has always been to the client's advantage to look around the market to see what other products are available if they moved providers. In the current fragile financial markets it is very often worthwhile staying put with your existing lender and to transfer to a standard variable rate which is proving to be more attractive. than to pay a very high fee to your existing lender to switch to a different plan.
Clients of course have the option of switching to a new provider but there are always fees which have to be taken in account the largest of which is normally the lenders arrangement fee. When you compare the Standard variable rate with an alternative product we are finding that in this very difficult financial market, June 2012, the cost to the lender of bringing new funds is much higher than they would normally expect to have to pay, and this cost is of course being passed onto the client with the result that the lenders fee underpins the headline rate. When the cost of the fee is added to the loan and is averaged out over the term of the plan,( normally 2/3 years ) although the SVR rate may appear to be more expensive the standard variable plan rate often becomes more attractive..
The standard variable rate also has the advantage that it does not normally attract an early redemption penalty which would allow the client to take advantage of any changes in the money markets in the future, to switch to another product or provider without the sting in the tail of an exit penalty..
We must see a return to positive growth in the property market to give lenders the opportunity to bring more attractive plans linked to the increased equity in property each month which then has the knock on effect of lowering the lenders exposure to risk.
In this market lenders are very much risk averse so high loan to value mortgages are not a priority, link this with the cost of funding in the money markets, the standard variable rate mortgage does have its advantages.
Interest calculation and interest charging
Be aware that there is a difference between interest calculation and interest charging. While some mortgage lenders calculate interest on a daily basis, which works out as fairer for the borrower as your capital balance is reducing every month as you make a payment. There are still some lenders who calculate the interest on an annual basis, and these products should be avoided if at all possible. You should also check how your payments are made as some lenders payments are made in advance whilst some are in arrears.
In the past clients were mindful of the effect of a plan coming to an end and then finding that the SVR interest rate was considerably higher than that on one of the lenders other products The downturn in the property markets linked the fragile financial markets has changed the perception of being on a Standard Variable Rate Mortgage.
Most common types of mortgage include
• Standard Variable rate mortgage
• Fixed rate mortgage
• Bank of England Tracker rate mortgage
• Offset mortgage
• Capped rate mortgage
• Cap and Collar mortgage
If you would like to know more then call Michael Alexander today on 03452 605506 and let us guide you through the mortgage process. We are Independent Mortgage Advisers with access to the whole of the market and specialist products via the mortgage clubs only available to Intermediaries.
This is very much a buyers market and any tenants who qualify for the Right to Buy scheme should take advantage as quickly as they can with property prices at a very low point and with the added help of the massive discount up to £75,000.
We at Michael J Alexander are here to help and guide you through the process and as Independent Mortgage Advisers we have access to the whole of the market including schemes for clients who have or may have had Bad Credit. We have lenders who will take a view of Bad Credit but you should always obtain a copy of your statutory credit file at a cost of £2. You can log onto www.experian/statutoryfile.co.uk which will allow us to make an informed decision as to whether we can help you with out credit searching you which will have a negative impact on your credit score. Having Bad Credit does not mean an automatic no, if it can be done we will offer you terms. Call us now on 03452 605506