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First Time Borrowing to reach £200,000
Research says that first time buyerís average mortgages have increased by 10.7% a year form 1996 to 2006.
In 1996 the average mortgage for a first time buyer was £39,811, nowadays it is £120,500 and will likely rise to £200,000 by 2012.
First time buyers are taking out mortgages three times their income now and need to earn around £40,000 but in 2012 they would need to earn the huge amount of £66,800.
Fixed mortgages have been around for a long time. Mortgage companies would not be called mortgage companies unless they offered you a fixed rate mortgage along side their discounted, variable, tracker or buy to let mortgages.
Homeowners have demanded mortgage security and therefore demanded that the mortgage be fixed. But in order to fix a mortgage the lender has to assess the likely movement of interest rates and will therefore hedge their bets considerably.
Interest rates are not easy to predict, they go up and down as erratically as a role coaster. You could have some very scary twists and dips in the lifetime of your mortgage, therefore you must make sure you get off your mortgage ride with all intact. If that means fixing your mortgage then thatís what you should do.
One of the advantages or reasons for taking out this type of mortgage is the stability, security and safety associated with knowing exactly how much your monthly mortgage re-payments will be for a given period i.e. term. By fixing your mortgage you will then be reassured that if the bank of England increases its interest rates it will have little or no impact on your cost of living.
Higher interest rates seems to be a pre-requisite of a house price crash i.e. interest rates go up, homeowners canít afford their mortgage payments, hand back their keys, the house reposes and the mortgage lender sells the house at a loss.
If you are moving home and buying a bigger property (whether house or flat) you may need to take out a larger mortgage. A set mortgage payment in the early years maybe of benefit whilst your personal income/salary catches up.
The disadvantages of fixed mortgages are clear. If interest rates fall you could be stuck with a higher than average mortgage rate and high redemption penalty. If you do not have a portable fixed mortgage you could find you canít afford to pay off the mortgage and therefore canít afford to move house/flat.
There are less than 20% providers offer fixed rate mortgages greater than ten years a total of 77 products.
There are fifteen times more for short term products on the market thus proving that long term fixed rates are not generally required.
A recent survey shows that 92% of mortgages taken out in 2006 were on a fixed rate.
Although fixed long term rates could be useful against rate rises they could also work
Against the borrower taking into account what could happen to the economy during the term time.
When considering borrowing money for a mortgage take time to work out the amount you can truly afford. Write down you monthly expenditure including insurances etc. then subtract the sum from your salary taking into consideration if the remainder is enough to afford a mortgage remembering to include an allowance for possible rate rises.
Every case is worked out according to the individuals personal circumstances and the loan offered in relation to these.
Before offering a loan lenders will want proof of income, loans etc and will assess your reliability in making payments
Nowadays most lenders will offer four or five times salaries as it considered that most borrowers have more disposable income and therefore able to afford higher loans..