08 October 2010

Understand the different types of mortgages?

A worrying report was recently released by First Direct, the online lender of the HSBC group. Following a survey of 2,000 customers, 92% of those planning on taking out a mortgage during the course of the next year don't understand the difference between the types of deal on offer. Only 26% of existing mortgage borrowers said they completely understood how the main types of mortgages work and, on average, only 22% completely grasped the difference between fixed rates, variable deals and tracker mortgages. The research also concluded that men are more likely to appreciate the difference between types of mortgage than women, at 26% compared to 18%. In short, the cynic in me would suggest that this shows the severe lack of advice taken and understanding provided for customers who buy mortgages online, or from a source only offering their own brand products.

Confidence amongst homeowners about the outlook for the property market has fallen sharply amid growing concerns over the availability of mortgage finance, say Zoopla.co.uk. According to the survey of 6,149 homeowners, the average growth predicted for house prices in the next six months has also dropped to only 3% from 5.5% three months ago. And the number of respondents who expect property prices to fall over the coming six months is up sharply to 1 in 4 (25%) from 1 in 10 (11%) only three months ago.

According to creditaction, at the end of June, there were 1.25 million buy to let mortgages outstanding, accounting for 12% of all mortgages, the highest proportion since records began. In addition, the lettings market remains buoyant, reports the latest RICS Residential Lettings survey, due to increased tenant demand and a shortage of properties pushing rents higher.

First Time Buyers accounted for 52,200 mortgages between April to June, up from 43,400 from January to March, according to the Council of Mortgage Lenders. The typical first time buyer deposit in July was 24% (£39k). The average loan was £123,711 and the average first time buyer borrowed 3.14 times their income.

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