Flexible Cheap Mortgages

Flexible Cheap Mortgages - The Truth

The mortgage market is not looking good right now. Latest figures have shown huge drops not seen for almost a decade*, in year-on-year mortgage statistics. And why is this? Because mortgage rates are rising and credit is being tightened continuously. Lenders are bringing out more and more uncompetitive mortgages that are offering less and less because they cannot afford to do otherwise. Historically flexible mortgages have always been more costly than other types of more rigid deals - they are a gamble and offer a lot of get-out clauses for borrowers, which means you have to pay for that privilege. So this means, unfortunately, flexible cheap mortgages are all but non-existent now. Lenders have not got the collateral to risk low rates with deals that offer payment holidays and underpayment. Flexible cheap mortgages are just not a reality in 2008.

And it's not just because lenders do not want to take the risk. One of the biggest advantages of flexible cheap mortgages is the lack of fees - underpayment usually brings penalties in most deals and overpayment brings early redemption charges - but not in flexible cheap mortgages. Lenders need these penalties and fees as a way to continue to recoup losses made during the credit crunch. They also need the security of knowing that each month they will receive just 100% of the repayment amount - no more and no less. With flexible cheap mortgages, you cannot guarantee that.

So what are you options if flexible cheap mortgages are not possible right now? Well, there are still many flexible mortgages on the market, albeit at a higher rate. There are still lenders who will offer deals that allow you to have payment breaks, which allow for underpayment and also allow for an early pay off. But you will have to pay for the freedom - expect rates a few percentage points higher than two years ago, and expect more limitation on the flexibility of flexible cheap mortgages.

But if you are still interested in finding the next best thing to flexible cheap mortgages, talk to a financial adviser. They know better than anyone the state of the mortgage market and they know exactly what people are offering and how much it is going to cost. If you need freedom and options, you can still find it but you are not going to find anything like flexible cheap mortgages for the foreseeable future.

* Bank of England, July 2008

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© 2007 - 2010 Offset Mortgage Centre | Terms and Conditions | Privacy Statement | Your home may be repossessed if you do not keep up repayments on your mortgage. *Source Barclays Bank: Calculation based on an offset tracker product; repayment mortgage of £100,000 over a 25-year term that has been offset with £20,000 savings, resulting in a reduction in mortgage term of 8 years and 8 months or a saving of £44,867 in overall interest. Calculation assumes balance remains constant throughout the life of the mortgage and that the mortgage loan and savings balance will vary. Outcomes will be either a reduction in payments or a reduction in mortgage term. No interest is paid on balances offset against the mortgage. Typical rate is 6.45% (variable). The overall cost for comparison is 6.7% APR.