I have read in the press recently that lenders are now offering fixed rates that last for the full term of the mortgage. Is there any advantage in fixing for such a long time?
Lenders have been offering fixed rates for up to 25 years, since about 1973. Although they are only offered by a few lenders, and may have limited appeal, they do offer some benefits. The biggest benefit they offer is security and peace of mind. If you were to take out an interest only mortgage on a 25-year fixed rate, you would be able to budget with certainty throughout the full period, as your repayments would never change. Also, consider that over the last 25 years the average mortgage rate has been a shade over 11 per cent and that with some lenders you can now fix for the next 25 years under 9 per cent, although you should bear in mind that the past is not necessarily an accurate guide for the future.
Long-term fixed rates will not be right for everyone, so it is important that you seek advice from a fully qualified, professional adviser, before committing yourself to any mortgage offer.
I have just moved into my new property and I would like to have its security measures assessed, so I can upgrade them where necessary. Who would you recommend I contact to arrange this?
I would recommend your first point of contact should be the crime prevention officer at your local police station. He or she will come and visit and offer advice and assistance where possible. The officer will also be able to put you in contact with your local Neighbourhood Watch co-ordinator. If you prefer you could get in touch with the National Neighbourhood Watch Association (0171 772 3349), which offers a self help guide for around the home and neighbourhood. Alternatively, contact your current insurer as he or she may be able to provide a booklet offering guidance on security measures.
It is also worth remembering that if you do make security improvements you could qualify for a discount on your house insurance. For example, some insurers will give you up to 10 per cent discount if you have an alarm system fitted that has a maintenance agreement in place with a Nacoss (National Approval Council for Security Systems) approved company.
Earlier this year I took a variable rate mortgage when I moved home. I know that mortgage rates have risen a couple of times recently, but my monthly repayments have not increased. Is there an explanation for this?
It sounds as though you have what is known as an "annual review" mortgage.
These types of mortgage are operated by most of the building societies and some of the new banks. In essence, the rate of interest charged on your account may fluctuate throughout the year but your repayments are only adjusted once a year, taking into account all of the changes in interest rates.
Some people do prefer this type of repayment method as they know what they will be paying each month for the whole year, although they may jump up when they are reviewed if there has been a number of increases in mortgage rate during the year.
However, for your own peace of mind, I would suggest you check with your lender just in case there has been an error when setting up the mortgage.
George Wise is managing director of NatWest UK Mortgage Services.
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Letting insurers off the hook
I am disappointed in George Wise's reply to M Thompson (28/9/97), who, like us, has been notified that the sum guaranteed in his endowment mortgage policy may not be sufficient to pay off his mortgage.
Insurance firms sold these policies on the basis they would deliver not a shortfall but a profit. The Royal Life representative who sold us our policy warned of the risk that the stock market could fall as well as rise. In fact the FT-SE has risen greatly since we took out our mortgage. Why are these companies now having to warn of underpayment?
It seems that this has emerged because the companies are now required to use a less optimistic basis for calculations than previously.
It is inappropriate to dump total responsibility on to the borrower. The companies are at liberty to set final bonuses, and to reduce their own fees and costs accordingly if necessary. You might like to consider whether the sale and subsequent performance of endowment mortgages is comparable with the mis-selling of pensions.