Interest Rate Imbalance
Interest Rate Imbalance By: Michael Sterios
Borrowers who are unable to move their mortgages, or who are unaware that they can find better deals than those they are currently on, are helping to fund their mortgage lenders prime mortgages products. Borrowers who have home loans that are too small in value to qualify for low interest rates are forced to stay with both the products and lenders they currently have.
Such borrowers are usually low income earners who may also suffer from adverse credit and therefore cannot qualify for the best home loan products that are available from the best mortgage lenders. As a result, these borrowers are forced to pay high interest rates, which in turn boost the mortgage lenders’ profits, allowing them to give discounts to their prime borrowers.
The borrowers who qualify for the discounted mortgage products are usually those who can afford to pay the higher rates. Instead, they are able to take advantage of the lower rate products that are typically offered to new customers or those that are looking to remortgage to other mortgage lenders. This scenario has created an inequality between wealthier borrowers and poorer home owners.
Added to this is the problem of high-street mortgage lenders constantly chasing new business and therefore having to pay mortgage brokers vast amounts of procuration fees for the home loan applications they complete. This is an additional cost to the mortgage lenders that must be paid for. It is likely that a large portion of this expense is funded by the borrowers who are stuck on the lenders Standard Variable Rates (SVRs), which are normally attached to the home loan products held by poorer borrowers.
While such an inequality is a cause for concern within the finance industry it is unlikely that the situation will improve. It is doubtful that mortgage lenders would alert their less fortunate customers that they may be able to switch to a product which can save them money.
Borrowers who feel they may be paying over the odds on their home loan should consult an independent mortgage adviser. An independent adviser will provide impartial advice on which products and lenders are right for an individual’s set of circumstances. It is sometimes the case that even borrowers with light to medium adverse credit histories can secure prime, or close to prime, mortgage product that do not have excessive fees and interest rates.
Home owners should also keep in mind that the financial markets are constantly changing. Various factors, including the recent credit crunch, force mortgage lenders to constantly alter their home loan products. This means that if a borrower was unable to secure a good mortgage product in the past it does not mean that they will be excluded from doing so at present or in the future. Home owners should keep an eye on the financial markets and should keep in touch with a qualified mortgage broker to ensure they are never paying over the odds on their home loan.
In this day and age of choice in the financial marketplace, there is little need for borrowers to stay with the same mortgage lenders and pay excessive interest rates.
Michael Sterios is a writer for http://www.ukmortgagesource.co.uk .
