TYLER MORTGAGE MANAGEMENT - INDIVIDUAL EXPERT ADVICE
Interest Rate Linkage
The choice most of us have to make at the outset of our mortgage is whether to allow our costs to vary over some or all of the term of the mortgage, or whether we are more comfortable to allow our costs to be fixed for a certain period.
With interest rates low, more people are opting to take a chance with variable rates as they are often cheaper than the current fixed rates on offer.
None the less we are often likely to ask our clients to consider the choice a business owner makes about their business premises.
Very few businesses in the UK agree a variable rent with their landlord that might move up or down in line with market conditions. Most occupational leases involve a fixed rent for a number of years which is then reviewed –this suits the businessman as he has fixed costs to exceed before considering if the company is making or losing money. If a prudent business owner takes no risk with their lease why would they risk having their personal budget exposed in such a manner?
The answer tends to be that people quite often are inclined to take bigger risks in their personal life than in business and a few pounds saved in the early period of ownership of a home can seem very attractive.
However, prudence (a word sadly devalued and worn out after Mr Brown’s constant use of it in recent years) could well pay off. If interest rates rise and the fixed rate borrower is comfortable then the variable rate borrower may be under pressure to move due to the rising housing costs they are suffering.
You should not assume from this that all the loans we arrange are linked to fixed rates but it is important that your advisor is not simply taking your order, but giving the advice that allows sensible decisions to be made about the benefits and pitfalls of all the choices available.
We believe very strongly in discussing the choices with our borrowers and arriving at an informed and agreed decision which is not just based on the initial monthly cost.
Both fixed and variable rates (either lenders’ variable rates or rates that track Bank of England Base Rate) can be arranged for periods from 1 to 25 years and this choice is also very much linked to the personal circumstances and expectations the borrower may have at the time the advice is given.
In addition to the simple choice between the fixed and variable options, there are also other product features that are available in the market from time to time such as Capped mortgages, Collared rates, Drop locks etc – if it is appropriate, and if the products are available, your advisor will talk to you about the attractions of such offers – in 30 years or more of giving advice many of us have seen products come and go as the economic cycle turns and can offer you an experienced view of such embellishments.
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To discuss your current or future mortgage requirements please call 020 7930 7242.
A typical fee for arranging your mortgage is 1.5% of the loan amount.