In the Current Market a Secured Loan May be a Better Option.

Posted by Russell Marsh

May 11, 2008

by Russell Marsh

According to our current analysis application fees have practically doubled this past year on the most popular, best deal fixed rate mortgages.

During the last 12 months the five most competitive two year fixed deals’ fees have increased from 998 to 1,500. Three year fixed deals’ fees have also increased from 575 to over 1,100.

Last October the base rate was 5.75% and the average interest rate of the top five two-year fixed rate mortgages was 5.68%, but now it is 5.57%. Three-year fixed deals have seen a similar tiny reduction in interest rates with the average rate of the top four deals moving from 5.84% to 5.65% over the same period of time.

The recent, very high profile, problems in the banking and mortgage industry have meant that lots of people are jumping the gun a little and opting for the lowest interest rate deal they can possibly find. They should also consider the fees associated with these lower rate loans as when added together over a two or three year deal these are working out to be much more expensive.

The large increase in application fees means that they now form a much more significant portion of the cost of the loan and really need to be considered just as importantly as the actual interest rate, especially in a relatively short term mortgage deal.

There are still many good deals out there for people with substantial deposits or equity in their home and strong credit ratings. Unfortunately many people will not be eligible for them as lenders are increasingly taking a tougher line.

All brokers and intermediaries should reconsider their strategy in helping clients wishing to raise capital in the light of the recent credit crisis and changes to the Consumer Credit Act. The changes in the market and to the Consumer Credit Act mean that a secured loan could be a much better option for many clients.

All secured loans for any residential purposes, under the new legislation, now come under the Consumer Credit Act. This means the client has to have a compulsory cooling off period. This has obvious advantages in that the client doesn’t feel under such pressure. If you also consider that with a secured loan there is no valuation fee, no conveyancing and no booking or application fees it’s pretty obvious that secured loans are a much better option in some cases than re-mortgaging. Even early repayment charges have a ceiling of two months interest (depending on when in the month the borrower informs the lender).

So if you’re tied in to your mortgage provider and wish to restructure some finance or raise money for a project then a better alternative to a re-mortgage could be a secured loan. Given the protection of the CCA and the lack of any upfront fees backed up by a simple one month’s interest to redeem a secured loan, clearly they are significantly, cheaper, easier to arrange, more transparent, and possibly more accessible than a re-mortgage.

About the Author:

Get the best Secured Loans in the UK market. We will scour the entire UK portfolio. Want a mortgage? then go to Debt Consolidation Mortgages for the best mortgage deal available in the UK.

Share and Enjoy: These icons link to social bookmarking sites where readers can share and discover new web pages.