In the UK over 99% of borrowers raise the mortgage they need to buy their home in sterling and pay the prevailing UK interest rate. But there are alternatives .
Debt Consolidation And Credit Despite increases in 2005, the UK's domestic interest rates are low by its' own historical standards. However, they remain significantly higher than in Eurozone, America, Switzerland and indeed, Japan. Therefore, currently you can take out a mortgage in Euros, $ dollars, Swiss Francs or Yen, convert the money you've borrowed into sterling, secure the debt against your house in the UK and end up paying a much lower rate of interest.
You can take a mortgage in £ sterling and have your interest rate linked to a foreign currency interest rate.
Check Credit Rating You may think that UK interest rates are low, but if you look at the 3 month money market interest rates you'll see that they remain significantly higher than in other parts of the world:
Bad credit personal loans are specifically devised for those who suffer from bad credit syndrome. But having a bad credit is not the end of the world. Lenders often charge a high rate of interest on Bad Credit Personal Loans. This is primarily because they want to safeguard the risk that is involved in bad credit personal loans. However, borrowers are aptly able to abstract a lower rate of interest from the lender when they compare various interest rates offered by the lenders.
Improve Credit Rating £ sterling 4.64%
Bad credit loan, bad credit mortgage, bad credit rating, poor credit rating, mortgage bad credit, mortgage bad credit rating
Credit Online Rating Report $ US 4.48%
Eurozone 2.46%
Swiss Franc 1.03%
Yen Japanese 0.12%
The advantages of 30 years mortgage is, when it is compared with 15 years mortgage the monthly payments are lesser, interest rate remains the same even if the interest rate goes up, monthly payment does not increases as it remains the same for the entire 30 years, compared to 15 years mortgage you would be paying higher rate of interest and the interest rate remains the same even if the interest rate gets decreased.
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(Source: Financial Times, 3 month Money market Rates, 9/12/05)
However, financial analysts predict the next interest rate move will be down, not up, making tracker mortgages an attractive option. But low fixed rate mortgages are still available, as mortgage lenders cut mortgage rates in a late summer mortgage rate price war. Among predictions of an interest rate cut early in 2006 however, a number of mortgage lenders have withdrawn their cheap fixed rate mortgages.
Bad Card Credit Credit People But you won't be able to take your mortgage out at these 3 month Money market rates. You'll have to pay a premium for borrowing in a foreign currency and the set up costs will be higher. Nevertheless, if interest rates were to remain as they are now, you could save a lot of money on your interest payments.
Free Credit Rating Report So why do 99% of UK domestic mortgage holders still choose a domestic UK mortgage? Most borrowers are unaware of foreign currency mortgages but that's not the main issue. The primary answer is that there are extra risks.
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International interest rates are constantly changing and gap between sterling interest rates and the foreign currency rate you've borrowed in, could narrow. This would reduce the interest rate saving and, if that trend continued, could make your interest rate more expensive than a standard £sterling mortgage.
Bad Credit Rating But the biggest risk by far lies' in fluctuations in currency exchange rates. If you borrow in say, Euros, you eventually have to repay the loan in Euros. That would be great if the Euro/Sterling exchange rate was fixed - but they aren't.
Credit Rating Agency If the £ sterling strengthened against the Euro, when it came to repaying the mortgage you would need to convert less £ sterling into Euros than the £ sterling value of the money you received when you first took out the mortgage. That would be great, a lower interest rate and repay less than you borrowed.
Credit Rating Canada But what happens if the value of sterling falls against the Euro as has happened in recent times?
Bad Credit Mortgage Rating You still have to repay the same number of Euros but you'll have to convert more £ sterling to achieve that. In other words you end up paying back more capital than you borrowed.
Good Credit Rating So in many ways, a foreign currency mortgage becomes a bet that the £ sterling exchange rate will not fall against the currency you've borrowed in. In other words you've transformed your mortgage and what is probably your biggest liability, into a major currency speculation. And your home's secured against it! You may be lucky and save a lot of money - but it's not for the faint at heart!
Credit Score Rating Chart Another point you should be aware of is the minimum deposit you'd need for a foreign currency mortgage. Most lenders ask for at least 20%. That's a reflection of the increased risk.
Credit Mortgage Rating Poor Incidentally, you now have second option to consider. You can take a mortgage in £ sterling and have your interest rate linked to a foreign currency interest rate. Whilst you avoid the biggest risk - the exchange rate risk, you are still taking gamble that the foreign currency interest rate plus the interest rate premium you pay, will remain lower than the equivalent UK interest rate. These foreign interest rate mortgages typically have a 5 year tie in clause. So, if you want to repay the mortgage early, you'll have a hefty redemption penalty to meet - although the mortgage can usually be moved to another property. For some borrowers this represents an acceptable risk, especially if the mortgage is linked to the Swiss Franc or Yen where interest rates have been astonishingly low and stable over past years. For example, the Swiss interest rate has not moved above 1% in the last 4 years and in the Eurozone, the interest rate has not changed for 5 years.
Good Credit Rating Score Nevertheless, part of the standard wording for a regulated investment warning is appropriate here past performance should not be construed as a guarantee of future performance
Poor Credit Rating Loan Still too risky for most borrowers!
Bank Credit Rating Michael writes for Brokers Online who offer life insurance cover and most UK financial services including information on best mortgage rates. Additional information - What is a Mortgage in Principle?
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Business Credit Rating Michael Challiner has 15 years experience in financial services marketing at senior level, the last 5 of which specialised in online marketing. Prior to that he spent 15 years in advertising with two of the world's top advertising agencies, J Walter Thompson and Saatchi & Saatchi.
Moodys Credit Rating Michael is currently the editor of Express Life Insurance and Andromeda Webs Ltd
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