Shift in banking industry

Banks may be shifting to simpler mortgage products to assist consumers.

10:05 09 May 2013

The banking industry may be overhauling some of their mortgage lending practices as the demand for interest-only mortgages declines. There are many other ways the banking industry can remain strong and provide a variety of mortgage options to their customers as well.

 

Here are some of the alternatives to interest-only mortgages that the banking industry is able to offer:

 

• Variable rate—these mortgages typically follow a fixed-rate mortgage. Essentially your monthly payments could fluctuate depending upon interest rates and a few other factors. Rates are calculated each year.

 

• Fixed rate—this is just exactly what it sounds from the banking industry. There is a fixed interest rate, a fixed term, and you know exactly what you will be paying.

 

• Trackers—these are similar to variable rate mortgages with the exception that the interest rates are not set against the lenders’ SVR or standard variable rate.

 

• Repayment—one of the simplest mortgage solutions available, you have a lengthy term between 25-30 years on average and payments go towards the principle and include a bit of interest as well. Look for the banking industry to promote these more frequently with the recent scrutiny of interest-only mortgages.

 

• Capped—these may allow variable rates, but with a built-in cap.

 

Before any mortgage decision it will always put the odds in your favour if you have built up substantial savings. Not only will the banking industry see it as commitment to the purchase, but it also could act as a down payment towards a property.

 

This may enable you to negotiate favourable deals within the banking industry, and if you compare among multiple institutions you may find out you are able to receive a significantly better deal than you first imagined.

 

Approaching the banking industry with savings and a good credit rating is a sure path to obtaining a mortgage.