By Graham J Head

The UK mortgage industry is a complex but efficient system. There are many products available for someone looking to finance the purchase of their home, and each product has its own benefit. To get the most of out your mortgage, you need to be armed not only with the knowledge of how the different products work, but also the current state of the UK mortgage industry. Simple knowledge of the industry may give you the advantage when negotiating a mortgage.

As of January 2009, it’s expected that Britain’s housing market will fall approximately 11 per cent this year, and will fall further through 2011 before it begins to stabilise – and this is all despite the lowest base interest rates that the Bank of England has seen in its 300-year history, down now to 1.5 per cent. Rates are expected to be cut further in February. House prices have already dropped 10.8 per cent this year, after falling 16 per cent in 2008. Unemployment throughout the UK is rising, and is expecting to go even higher this year; in combination with a shortage of mortgage credit to new buyers, it is predicted that there will be more declines in future prices.

Even with this shortage of mortgage credit, forecasters are calling for more monthly mortgage approvals: 35,000 in six months, and up to 50,000 per month in a year. Right now mortgage approvals are sitting at only 27,000 per month. Even with the global financial crisis, lenders want to give you a mortgage. As long as your credit is in good standing, it is still possible to get a mortgage at a reasonable rate. It is still true that it will be more difficult to get approved if your credit is too low, so make sure that you are in good standing.

However, even with the falling interest rates, approximately 52 per cent of Britons have a fixed mortgage rate – meaning that the falling interest rates are having no effect on their mortgage. While fixed rates were advantageous in the past, they’re not looking too great right now – that is, if you already have a fixed-rate mortgage. Interest rates are still expected to drop, but the savings would be enormous should the rates begin to rise again in the next few years. Lenders are reducing fixed mortgage rates, so it is a good time to look around and find the best rate possible.

Be sure to get as much information as you can before committing to a mortgage; with housing prices falling and base interest rates plummeting, it is an ideal time to apply for a mortgage.

Graham J Head

Inside UK Mortgages

Choosing a mortgage product

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