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Standard
Variable Rate
A Standard Variable Rate Mortgage (or SVR) is the standard rate of interest
a lender charges for mortgage loans. It is normally 1-2% above the Bank
of England’s ‘base rate’ and each lender will increase
or decrease their SVR in line with any changes made to the ‘base
rate’ by the Bank of England’s Monetary Policy Committee.
As a result, if you are linked to an SVR your mortgage repayments can
go up and down – perhaps even on a monthly basis - with no ‘upper’
or ‘lower’ limits to the interest rate you are charged.
Some people choose an SVR product because they don’t want to tie
themselves into a fixed rate of interest, perhaps because they want
to see what will happen to interest rates in the short-term.
Other people find themselves automatically switched on to their lender’s
SVR once their current mortgage deal has come to an end.
Fixed
Rate
A ‘Fixed Rate’ mortgage is one where the rate is set or
‘fixed’ at a certain level, normally for a period or 2-5
years. No matter what happens to the base rate or the lender’s
SVR during that period, the rate you pay will remain at the same level.
The advantage of a Fixed Rate mortgage is that you know exactly how
much your mortgage repayments are going to be. This is ideal for people
trying to balance their monthly budget and concerned about rising interest
rates.
The main disadvantage is that, if interest rates fall, your repayments
stay at the same level, even if they fall below the rate at which you
have fixed your mortgage. You may also have to pay a penalty or ‘Early
Repayment Charge (see jargon explained: Early Repayment Charge) if you
want to get out of your current fixed rate deal and take out a new one
at a lower rate.
Discounted
Rate
A Discounted Rate mortgage works by offering you a discount on the lender’s
Standard Variable Rate or SVR (see Standard Variable Rate). The discount
might be set at 2 or 3% below the SVR and will apply for a certain length
of time, typically 2 years. So, if the lender’s SVR was 6% and
you were offered a 2% discount, you would be charged a rate of 4% interest
on your loan. If the SVR increased to 7%, your rate would go up to 5%
and so on.
Sometimes, the discount will change over time. So, for example, you
might get a 2% discount for the first 6 months and then a 1% discount
for the following 12 months. This is sometimes referred to as a ‘Stepped
Rate Mortgage’.
Because the interest rate is not fixed, your repayments will go up and
down in line with movements in the SVR, but the discount means that
you will always be paying less than the SVR for the term of the deal.
A Discounted Rate is a good choice for someone who does not want to
tie themselves in to a Fixed Rate deal, especially if you believe that
interest rates may fall in the near future.
Capped
Rate
A Capped Rate mortgage works in a similar way to a Fixed Rate. The rate
of interest you are charged is linked to the Standard Variable Rate
or SVR, but a maximum interest rate or ‘cap’ is set. If
the SVR increases, so do your monthly repayments but only up to the
rate set by the cap. Even if the SVR increases above the capped rate,
your repayments will not go any higher.
Sometimes, a Capped Rate will also have a ‘Collar’ included
– this is a minimum interest rate that will be charged –
in other words, there is a maximum and a minimum rate of interest set
for the period of the mortgage deal.
The advantage of a capped rate is that you know the interest rate you
are charged will never go above a certain level during the deal period.
On the other hand, if interest rates fall (providing they are below
the cap) then so do your mortgage repayments.
Like a Fixed Rate, a Capped Rate mortgage is ideal for someone who wants
to control their monthly budget, as you know from the outset the maximum
mortgage repayment you will be charged.
The disadvantage is that Capped Rate mortgages can turn out to be more
expensive than a Fixed Rate mortgage because the interest rate ‘cap’
is often set much higher than a Fixed Rate. If interest rates rise up
to or beyond the cap and stay there for some time, you may have been
better off with a Fixed Rate mortgage instead.
Tracker
Tracker Mortgages are a relatively new type of mortgage deal. They were
introduced to help pass on movements in the Bank of England’s
Base Rate (particularly downward movements) more quickly to mortgage
borrowers. Sometimes, lenders react very slowly to changes in the Base
Rate or may not even react at all if the change is only very small.
A
Tracker Mortgage has a rate of interest set slightly above the Base
Rate, but usually just below the lender’s Standard Variable Rate
(SVR). As the Base Rate is increased or decreased, your tracker rate
moves accordingly and your monthly payments will go up and down, even
if the lender does not change their SVR.
The
advantage of a Tracker Rate is that is a little bit cheaper than a Standard
Variable Rate mortgage and you will benefit from every downward movement
of the Base Rate, even if the lender does not decrease their own SVR,
although there is still no protection against increases in the Base
Rate and no ‘upper limit’ on how much you could be charged.
Flexible
Rate
Like the Tracker Mortgage, Flexible Mortgages are a relatively new introduction
to the UK market. Most lenders now offer them, although the choice of
interest rate can often be restricted to just a Standard Variable Rate.
With a Flexible Mortgage, you are able to make overpayments or underpayments
and sometimes even take a break from making any mortgage repayments
at all. Some products also allow you to treat them a bit like a bank
account, meaning that you can even have your salary paid into your ‘account’
and giving you the option to draw down additional cash (a bit like an
overdraft facility) if you need it.
Flexible Mortgages might be good for people who have incomes that fluctuate
throughout the year and who might want to make overpayments when income
is high to allow them to reduce or even miss payments when income drops
away. The ability to overpay also means that you have the opportunity
to repay your mortgage early – and potentially save thousands
of pounds in interest repayments.
However, you may have to make several mortgage payments before your
lender will allow you to reduce or even miss payments altogether. A
Flexible Mortgage also requires a degree of discipline on your part
– if you miss or even just reduce some payments, you will have
to make them up at some point in the future.
Cashback
A Cashback mortgage is not really a mortgage rate deal in itself, but
a special offer associated with certain types of mortgage rate deals.
A Cashback deal is normally a percentage of the mortgage loan, given
back to you as a cash sum on completion of the mortgage. Cashback deals
can range from a few hundred to several thousand pounds.
House buying can be a very expensive business and so a Cashback deal
could provide a welcome boost to help meet some of those costs. This
makes them ideal for people on a very tight budget, especially ‘First
Time Buyers’ (see jargon explained: First Time Buyer).
However, there are some disadvantages. The rate of interest charged
for a Cashback deal will normally be higher than for the same product
without Cashback. You may also find that you have to pay back some or
all of the Cashback if you repay your mortgage within a certain period.
All
about CCJs
If you owe someone or a company money and you do not (or cannot) repay
that debt, you could find yourself served with a County Court Judgement
(CCJ) by your Creditors.
A
CCJ is a special court order that sets out terms for the repayment of
that debt. If you have a CCJ registered against you, it will show up
on your Credit reference file and can seriously affect your ability
to get credit in the future, such as a mortgage or remortgage. Once
you have a CCJ, it will normally stay on your credit record for up to
six years.
As
a specialist in providing mortgages and remortgages for people with
CCJs, Oakhill has a range of mortgages that take into account any previous
CCJs you have against your name. Our rates will differ, depending on
how many CCJs you have, how old they are and the total value, which
means there is a great mortgage or remortgage deal to suit virtually
everybody, regardless of your history.
Bad
Debt Mortgage
Anyone who has taken on too much debt in the past can end up with a
bad debt record. This is normally because of interest rate rises that
have caused monthly repayments to increase to unaffordable levels. Or
it could be down to bad luck, such as redundancy, leading to problems
with repaying existing debt.
If
you miss repayments on credit cards and other debt, this will show up
on your credit record and will affect your ability to get more credit,
as you will be regarded as a high risk debtor.
At
Oakhill, our Bad Debt Mortgages take into account your previous history
and problems with repaying debt. We treat each case individually, listening
to your particular circumstances so that we can provide a suitable mortgage
deal.
Adverse Credit Mortgage
The term ‘adverse credit’ is used to describe someone who
might have had a range of debt problems in the past. These might include
County Court Judgements (CCJs), mortgage arrears and bad debt.
Someone with an ‘adverse credit history’ will have problems
applying for any type of credit, especially a mortgage, because these
problems will show up on a credit reference and affect your overall
credit score.
However, at Oakhill we specialise in helping people with adverse credit
backgrounds. We listen to individual circumstances as we believe that
a poor credit history shouldn’t stop you getting the mortgage
you need.
Our range of Adverse Credit Mortgages are specially designed to take
into account different circumstances, enabling us to match the right
deal to you.
Poor
Credit Mortgage
Like ‘adverse credit’, the term ‘poor credit’
is used to describe someone who might have had a range of debt problems
in the past. These might include County Court Judgements (CCJs), mortgage
arrears and bad debt.
Someone
with a ‘poor credit history’ will have problems applying
for any type of credit, especially a mortgage, because these problems
will show up on a credit reference and affect your overall credit score.
However,
at Oakhill we specialise in helping people with poor credit backgrounds.
We listen to individual circumstances as we believe that a poor credit
history shouldn’t stop you getting the mortgage you need.
Our
range of Poor Credit Mortgages are specially designed to take into account
different circumstances, enabling us to match the right deal to you.
Mortgage
Arrears Mortgage
As probably one of the biggest monthly outgoings, it is very easy to
fall into problems with repaying the mortgage. People who have borrowed
the maximum they can afford could easily be caught out by sudden rises
in mortgage interest rates, as happened in the early 1990s when interest
rates went as high as 15% - about three times what they are currently.
As
with any other form of credit, if you miss a mortgage repayment this
will show up on your credit record and it could affect your ability
to get new credit in the future, such as a remortgage.
If
you have had mortgage arrears in the past, we can help. As specialists
in this area, our range of Mortgage Arrears Mortgages have been designed
to offer a fresh start to people who have had mortgage problems in the
past.
Individual
Voluntary Arrangement (IVA) Mortgage
IVAs were introduced in 1986 as a way of helping people with serious
debt problems avoid bankruptcy, whilst at the same time giving creditors
the chance to get back at least some of the money they are owed.
An
IVA is an agreement with all of your creditors that you will make just
one regular monthly payment over a five year period to help pay off
a percentage of your total existing debt. Up to 75% of that debt can
be written off with an IVA and after 60 months you are guaranteed to
have repaid all of your existing debt. During that period, your creditors
are not allowed by law to add any interest or penalty charges to your
debt.
However,
if you have an IVA against your name, you will find it extremely hard
to get further credit.
Most
‘High Street’ lenders would turn down a mortgage application
by someone with an IVA, but at Oakhill we are prepared to listen. We
have a special range of Mortgages that allow IVA's and would suit most
individual circumstances.
Bankruptcy
Mortgage
Although it used to apply mainly to companies and partnerships, it is
now possible for an individual to be declared bankrupt. The process
is surprisingly simple and is often seen as an ideal way of getting
out of a serious debt problem. After a period of time, usually about
three years, you are declared a ‘discharged bankrupt’ and
you no longer owe any money to your creditors (with only one or two
exceptions).
In
recent years, incidents of graduating University students declaring
themselves bankrupt to help ease the burden of massive student debts
have increased.
However,
it can be extremely difficult to get any sort of credit in the future,
let alone a mortgage, if you are a discharged bankrupt (if you have
not been discharged, it is illegal to apply for more than £250
of credit).
At
Oakhill, we specialise in helping all sorts of people with adverse credit
histories get the mortgage deal they want, including people who have
been discharged from bankruptcy. We have a range of mortgage deals on
offer, each tailored to specific circumstances to help you get a deal
that’s right for you.
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