UK Mortgage : The mortgage market of UK is one of the most sophisticated mortgage markets in the world.
The UK mortgage market offers a choice of around 4,000 products to customers.
It is one of the most competitive where there is a growing need for lenders to devise
winning strategies. However in such types of markets innovation is proved to be
one of the determining factor in differentiating the winners and losers in the
future.
Market of UK mortgage is a top most innovative
and competitive market in the world. The
Mortgage market of UK differs in comparison to the other countries in
the ground thatthere is no
intervention in the market by the state or state funded entities.
Due to the poorer economic conditions, the mortgage market in UK has contracted more in 2005 than
predicted before. There was a general slowdown in the total secured lending
mortgage market for the year 2004.The progression of the buy-to-let mortgage
market in terms of market share from 2003 to 2004 was the lowest observed (0.6
percentage point compared to 1.3 percentage points in the previous period.
Making a better customer relationships Lloyds TSB gained market share in 2004 and moved into
second place in terms of gross advances. In contrast, Barclays was the only
lender in the top ten to witness a decline in both its mortgage book and its
new mortgage business in 2004.
Process Of Mortgage In UK
In the Mortgage market of UK, lenders
usually charge a valuation fee, which pays for a chartered surveyor to visit
the property and ensure it is worth enough to cover the mortgage amount.Such
type of survey is not a full survey .That is why it may not identify all the
defects that a house buyer needs to know about.Even it does not form a contract
between the surveyor and the buyer.
Mortgage Lending In UK Presently
According to the figures from the Major British Banking Groups net
mortgage lending in November-2005 rose by an underlying £5.1bn; the strongest
rise since July 2004. It is much higher than both October's rise of +£4.3bn and
the average of +£4.4bn over the previous six months .A lower growth is being
marked in overall unsecured personal lending. Both loans & overdrafts have
risen by just £0.1bn, on the recent average (£0.4bn).
BBA director of statistics, David Dooks have said that,”November’s above-average rise in mortgage
lending has truely reflected the recent upturn in approvals and provides more
evidence that the mortgage market bottomed out in the summer and is now being
underpinned by steady demand”.
Some Mortgage Types In UK
In case of Repayment mortgages each monthly payment
pays off a little of the underlying debt, as well as interest on the loans.
After the completion of the term the mortgage is then cleared.
In Case of the Endowment Mortgages an endowment
policy is provided to life insurance and save funds to repay the loan at the
end of the term (Generally 20-25 years). If the investment performs badly, then
a shortfall is faced on your loan at the end of the repayment period.
Individual Savings Account (ISA) mortgages work on
the same principle as endowments, but an Individual Savings Account is used as
the loan repayment method. If your investment performs badly you could face a
shortfall at the end of the mortgage term.
Pension mortgages are similar to both ISA and
endowment mortgages, but work on the basis that pensions provide tax-free cash
on retirement. After the end of the mortgage term the loan is paid out of your
tax-free lump sum.
Interest Rates On Mortgages In UK
The interest rates on any mortgages are not different only the range of options offered
differ.
Variable
rates– Here you
have to pay the continuing rates on your loan. The mortgage rate changes every
time interest rates change. Whatever may be the kind of mortgage you start
with, it is likely to change to variable rates at some point of time
Fixed
rates– Here the
interest rate is fixed for the period agreed - often two to five years
Capped
rates - These
are fixed, but if rate falls you have to pay the lower rate. Such deals can be
a good for budgeting.
Cash
back deals -
This is when lenders offer money back if you take out a particular product.
Discounted
rates – In such
type of mortgages the borrower is offered a discount off the lender's variable
rate. The rate paid will fluctuate in line with changes in the variable rate.