Mortgages – how do you cope with the choice?

For some years now, societies emphasis on a person’s right of choice has been a mainstay of both politics and economics, the two often intertwined. A customer, or so it is argued, should be able to make decisions about their children’s schools, even which medical ‘solution’ is most suitable for their needs. Choice is equated with democracy – people’s right to make a decision based on alternative, desirable options. But the downside to all this choice is that it can sometimes take a genius to work out what the best choice might be.

This is particularly apparent when you are looking at the housing market, where the competitive nature of the industry has led not only to a proliferation in services, but also to an emphasis on marketing. Before the 1980s it was fairly common practice to approach a bank for banking and loans and a building society for mortgages. These delineated boundaries ensured that lenders were less proactive in encouraging debt and marketing was limited. It is now fairly common for banks to operate in the same way, say, as high street shops.

The buying and selling of property has come a long way. Once viewed as simple places to live, the comparatively poor performance of stocks and shares since the mid nineties, have led more people to view bricks and motor as investments. Even allowing for inflation, the value of property has risen almost fivefold from 1957 to 2005. Despite a dip in the mid nineties, the trend, overall, has been positive. Who wouldn’t want this kind of investment?

The only problem is that people sometimes enter into the mortgage market with an inaccurate picture of the risks they are taking. Householders may be able to generate money, perhaps by renting a room, but it is more likely that costs like roof repairs will prove a liability. Added to this is the uncertain nature of the UK housing market, where interest rate changes can impact on millions of people. This is before the marketing has kicked in, those slick adverts that promise all kinds of great deals, (like ‘teaser’ interest rates) but should be viewed with caution. Certain fixed rate mortgages which reset in a few years time may leave homeowners paying unexpectedly higher rates later on.

However, a fixed rate mortgage, can also protect you from interest rate rises and allow you to calculate exactly how much you owe every year. Whether it is good value or not will depend on interest rate fluctuations after you are locked in to the contract. In contrast, variable rate mortgages follow the official rate set by Bank of England. But these are only a few choices. The best thing for an inexperienced buyer to do is ask mortgage providers for a Key Facts Illustration document. At least this will allow you to compare and contrast different mortgage products – and find out which really represent good value for money.

Article Source: http://www.mycontentbuilder.com

Adam Singleton is an online freelance journalist from Scotland. His hobbies include travelling and hiking.

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