The 2006 Mortgage Lender Survey found fixed interest rates, closely followed by the reputation of the lender as the top two attributes most likely to make Britons choose a mortgage product.

The survey also found that consumers generally regarded features such as higher lending multiples and the absence of higher lending charges – the fees charged by lenders when extending loans of more than 75 per cent of the value of the property – were amongst the least popular reasons for choosing a mortgage provider.

Barry Stamp, Joint Managing Director of checkmyfile. com, the UK’s leading provider of online credit files to consumers, said: “Our survey suggests the average UK consumer tends to be much more cautious when choosing a mortgage, compared to choosing other forms of credit which tend to be crisis-led. Consumers look for some stability when it comes to what is likely to be their largest monthly outgoing. Despite the relatively stable interest rate environment we have enjoyed for some years, they are keen to protect themselves from interest rate shocks. ”

The motivation for choosing a mortgage was found to differ between the genders in two distinct ways.

Barry Stamp added: “The top priority for men, when it comes to choosing a mortgage, is a fixed interest rate. Women, on the other hand, look at the reputation of a lender as the most important factor in choosing a mortgage. Getting a quick decision is also a key factor for men. Women are far less concerned about how quickly their mortgage offer appears. ”

As consumers get older, the key factors in choosing a mortgage product also change.

“Consumers in their 20s tend to look for the security offered by fixed rate mortgages, the reputation of the lender and the level of fees charged. They are not so concerned about how quickly they get confirmation of their mortgage offer – probably as they have no prior experience to base an expectation of the time a mortgage application can take.

“Consumers in their 30s also look to fixing their interest rate, and are more likely to be an existing customer of the lender. They are, however, looking for a quick decision on their mortgage offer.

“When a consumer reaches their 50s, their priorities have changed significantly. The top priorities for this age group are to choose a mortgage that gives them the ability to vary repayments and they are keen to choose a lender with a strong reputation. A quick mortgage offer in writing is also a key priority,” said Stamp.

With the reputation of mortgage lenders being the second most important factor for UK consumers in their choice of mortgage, the 2006 Mortgage Lender Survey asked respondents about the customer service levels of the top UK mortgage lenders.

60% of respondents to the survey rated the standard of customer service provided by mortgage lenders as ‘excellent’ or ‘very good’. One in six consumers were dissatisfied with the standard of customer service received.

Northern Rock and Nationwide were rated by respondents as the best mortgage lenders for their high standards of customer service. At the other end of the scale were Halifax and Barclays.

The full results of the 2006 Mortgage Lender Survey can be viewed online on checkmyfile. com.
checkmyfile. com has found.

The 2006 Mortgage Lender Survey found fixed interest rates, closely followed by the reputation of the lender as the top two attributes most likely to make Britons choose a mortgage product.

The survey also found that consumers generally regarded features such as higher lending multiples and the absence of higher lending charges – the fees charged by lenders when extending loans of more than 75 per cent of the value of the property – were amongst the least popular reasons for choosing a mortgage provider.

Barry Stamp, Joint Managing Director of checkmyfile. com, the UK’s leading provider of online credit files to consumers, said: “Our survey suggests the average UK consumer tends to be much more cautious when choosing a mortgage, compared to choosing other forms of credit which tend to be crisis-led. Consumers look for some stability when it comes to what is likely to be their largest monthly outgoing. Despite the relatively stable interest rate environment we have enjoyed for some years, they are keen to protect themselves from interest rate shocks. ”

The motivation for choosing a mortgage was found to differ between the genders in two distinct ways.

Barry Stamp added: “The top priority for men, when it comes to choosing a mortgage, is a fixed interest rate. Women, on the other hand, look at the reputation of a lender as the most important factor in choosing a mortgage. Getting a quick decision is also a key factor for men. Women are far less concerned about how quickly their mortgage offer appears. ”

As consumers get older, the key factors in choosing a mortgage product also change.

“Consumers in their 20s tend to look for the security offered by fixed rate mortgages, the reputation of the lender and the level of fees charged. They are not so concerned about how quickly they get confirmation of their mortgage offer – probably as they have no prior experience to base an expectation of the time a mortgage application can take.

“Consumers in their 30s also look to fixing their interest rate, and are more likely to be an existing customer of the lender. They are, however, looking for a quick decision on their mortgage offer.

“When a consumer reaches their 50s, their priorities have changed significantly. The top priorities for this age group are to choose a mortgage that gives them the ability to vary repayments and they are keen to choose a lender with a strong reputation. A quick mortgage offer in writing is also a key priority,” said Stamp.

With the reputation of mortgage lenders being the second most important factor for UK consumers in their choice of mortgage, the 2006 Mortgage Lender Survey asked respondents about the customer service levels of the top UK mortgage lenders.

60% of respondents to the survey rated the standard of customer service provided by mortgage lenders as ‘excellent’ or ‘very good’. One in six consumers were dissatisfied with the standard of customer service received.

Northern Rock and Nationwide were rated by respondents as the best mortgage lenders for their high standards of customer service. At the other end of the scale were Halifax and Barclays.

The full results of the 2006 Mortgage Lender Survey can be viewed online on checkmyfile. com.

Mortgage Defined

A lot of people tend to use mortgage to mean a mortgage loan. A mortgage refers to the document that you, as a borrower, sign and entrust to a mortgage lender in return for a mortgage loan. If you default on your mortgage payments, the mortgage lender, through the document called mortgage, has the right to take possession of your property. The borrower, the one who applies for a mortgage loan, is referred to as the mortgagor since it is the borrower who hands the mortgage over to the mortgage lender.

Mortgage Loan

The basic premise of a mortgage loan is that it is a type of loan used to pay the difference between the purchase price and the cash available for a down payment. When mortgage lenders let you use their money, they will charge you a fee for it. The biggest fee is called the interest, which is expressed as an annual percentage of the loan. Usually, it is in the range of a low 5% and a high 12%. When you apply for a mortgage loan at one of these financial institutions, they will also charge you with an origination fee, which may include application fees, credit report fees and appraisal fees. The annual percentage rate (APR) consists of the base interest rate with points and other fees.

Mortgage Loan Rates

The mortgage loan comes in a fixed rate and adjustable rate. A fixed rate mortgage loan refers to a loan that features a fixed interest rate and fixed monthly payments for the entire life of a loan. Mortgage lenders typically offer 15- and 30-year fixed rate mortgage loans. An adjustable rate mortgage loan features lower initial rates, which may change as frequently as every six months. Borrowers who prefer going the least expensive way can opt for the 15-year mortgage loan. However, this type of loan is suitable for those who can afford the higher monthly mortgage payments. For people who plan on moving to another home in less than eight years, may find it more appropriate to settle for a 30-year mortgage loan, with its lower monthly mortgage payments.

Mortgage Loan and Down Payment

The down payment made on a house is usually in the range of five to 20 percent. The down payment precedes the mortgage loan, or the amount borrowed on the residual cost of the house. Thus a house that’s worth $450,000, you will require a down payment of $90,000 and a mortgage of $360,000.

Basic Mortgage Interest

Interest rates are prone to fluctuations, which make them highly unpredictable. There are two popular indices of short-term interest rates. The first one is the rate banks offer for six-month certificates of deposits (CDs). The second one is the interest on Treasury Bills, or T-bills. Mortgage lenders operate by charging around 2. 5% over the publicly quoted interest rate. Compared to short-term rates, long-term rates are higher since they expose lenders to greater risk when lending money for a long time.

An offset mortgage means borrowers only pay interest on their net loan amount – minus any savings they have in the same or linked account. Monthly mortgage repayments are calculated on the full debt, before offsetting is taken into account, so borrowers overpay their debt each month. Consequently, their mortgage debt is reduced much faster than with a conventional mortgage. Two examples are:

- A borrower with a £100,000 mortgage paying offset tracker loan rate of 5. 24% would save more than £39,000 interest over the life of the mortgage by offsetting £20,000 of savings. The borrower would also pay off the mortgage five years early, based on a 25-year mortgage.

- A borrower with a £150,000 mortgage would save more than £60,000 interest over the life of the mortgage by offsetting £25,000 of savings. If the borrower continues to make mortgage repayments based on the full loan, he would pay off the mortgage five years and three months early, based on a 25-year mortgage.

Savings and income can be drawn on as needed, or built up to cut future repayments, and borrowers do not pay tax on the interest earnt from their savings when it is offset against a mortgage.

According to one mortgage lender, one in four households would benefit from an offset mortgage. The Council of Mortgage Lenders said the number of offset borrowers jumped 50% last year to 170,000, which was worth £29. 3bn, and represented 7% of new lending. However, many households looking for a new mortgage do not realise they would be better off with an offset mortgage.

An offset mortgage tends to be the best option for borrowers with savings worth at least 8% – 10% of their mortgage if they are a higher rate taxpayer, for example, a higher rate taxpayer would need at least £10,000 in savings to offset against a £100,000 mortgage. A basic rate taxpayer would need at least £20,000 in savings to offset against a £100,000 mortgage. To match the savings made by offsetting, a higher-rate taxpayer would approximately need to earn 12% in a deposit account or 9% for a basic-rate taxpayer. An offset mortgage can also be suitable for people who are paid large bonuses or large amounts of commission on an irregular basis.

The Council of Mortgage Lenders said there are 250 offset products available. Three examples are:

- A cash Isa that can be set against the mortgage for tax-free savings

- Up to six current accounts can be used to offset against the mortgage – this allows family members to add their finances to the accounts, so it can be offset against the mortgage.

- Family offsets, which enable parents to help their children get on the property ladder. Parents can use their savings to be offset against the mortgage, which will bring down their children’s monthly repayments, and they still have access to their savings if they need it.

Offset loans are flexible. Without penalty, borrowers can pay off capital, make underpayments, and take payment holidays. Because an offset mortgage is flexible, the loans have a higher rate than traditional deals. However, the rates on an offset mortgage have fallen in recent years due to increased competition and many borrowers believe it is worth paying a premium rate because of the benefits gained with an offset mortgage.

An offset mortgage has grown in popularity for borrowers because offsetting is a great way to reduce the term of the mortgage, thus saving thousands of pounds on mortgage repayments, and still allowing access to savings for emergencies.

Offset mortgages are especially attractive for higher rate taxpayers who would otherwise be charged 40% tax on interest earnt on their savings. When the interest earnt on your savings is automatically used to offset your mortgage, you will not have to pay any tax on those saving. According to one major financial lender in the UK, they believe that 25% of existing mortgages holders would be better off with an offset mortgage.

Offset mortgages are also flexible without a penalty. You can make extra payments, under payments and have a break from payments as long as you have made sufficient overpayments over the years.

Not all offset mortgages are the same. The competition among lenders is increasing and as a consequence the borrower has more options to choose from. This can include: free property valuations and free legal work, using two nominated saving accounts to be offset, and additional borrowing facilities. Depending on your lender, the saving accounts of family members can be combined to offset against one person’s mortgage; this is a popular choice for parents who want to help their offspring purchase their first home.

There are some disadvantages to an offset mortgage. Most offset mortgages allow the borrower to have a credit limit; if you are not disciplined about paying this back, then at the end of your mortgage period, you could be left with a big loan to pay. Thus, it takes a lot of budgeting and self-control to ensure the current account mortgage works effectively. Interest rates are different for the current account, savings and mortgage, so you do not have the opportunity to save money at the Standard Variable Rate like you can do with a current account mortgage.

Offset mortgage originally started in Australia and are fairly new to the UK market, however they have quickly gained in popularity. Originally, mortgage lenders only targeted the wealthy but they have now widen the market for customers who are charged basic tax and have savings. As a rough guide, a basic taxpayer needs around £20,000 in savings behind a £100,000 mortgage to make the offset deal better than a traditional mortgage. For a higher rate taxpayer, the savings requirement is about £10,000 although those figures will change as interest rates vary. If you are looking for a mortgage, an offset mortgage is something to seriously consider, particularly if you are a higher rate taxpayer and/or have substantial savings to offset. While the basic concept of an offset mortgage is simple, it does get complicated. This clearly underlines the need to talk things through with a mortgage advisor. It is their job and responsibility to ensure you get the right type of mortgage and the best deal.