Table of Contents
1. Introduction
2. The History of Mortgages: From Ancient Times to Modern Lending
3. Different Types of Mortgages Explained
4. What Are Interest Rates and How Do They Affect Your Mortgage?
5. High Street Banks vs. Independent Mortgage Advisors
6. EHF Mortgages: Your Access to the Whole Market
Introduction
Purchasing a home is one of life’s most significant financial decisions, and for most people, a mortgage is a crucial part of the process. But what is a mortgage exactly? At its core, a mortgage is a type of loan used to buy property, with the property itself acting as security.
This article will walk you through the history of mortgages, the different types available today, the importance of interest rates, and why independent mortgage brokers like EHF Mortgages can offer you broader options than many high street banks.
The History of Mortgages: From Ancient Times to Modern Lending
The concept of using property as collateral for a loan dates back thousands of years, but mortgages in their current form have evolved significantly. The word “mortgage” originates from Old French, translating to “dead pledge.” This referred to the idea that the pledge (the loan) would become void (or dead) when the debt was either repaid or defaulted.
The First Mortgages:
The modern mortgage as we know it began to take shape in the late 17th century. The UK’s mortgage system grew out of an evolving legal framework, and by the early 20th century, banks began offering long-term loans with fixed interest rates—helping ordinary people access homeownership. One of the pioneers in this field was The Building Societies Association, which paved the way for the system we have today by offering collective savings and loans to help build homes.
Different Types of Mortgages Explained
Today, there are many different types of mortgages available, each tailored to fit the unique needs of borrowers. Some of the most common types include:
Fixed-Rate Mortgages
A fixed-rate mortgage is one where the interest rate stays the same for a specified period, usually between 2 and 10 years. This type of mortgage product offers stability, making it easier to plan your finances, as the monthly payments won’t change throughout the period, irrespective of what happens in the economy.
Variable Rate Mortgages
With a variable-rate mortgage, the interest rate can change over time, based on the lender’s standard variable rate (SVR), which is set independently by that lender and can differ significantly between building societies.
Tracker Mortgages
These mortgages are normally tied to the Bank of England Base Rate, so your payments will fluctuate, but will be a fixed margin above that same base rate. This can be beneficial when rates are low but carries more risk if rates rise.
Interest-Only Mortgages
In this scenario, you only pay the interest on the loan each month. At the end of the term, the full loan amount still needs to be repaid. These are less common but can be a viable option for buy-to-let properties, or short-term mortgage lending.
Offset Mortgages
Offset mortgages allow you to “offset” your savings against your mortgage debt. This means you pay interest only on the difference between your savings balance and your outstanding mortgage.
What Are Interest Rates and How Do They Affect Your Mortgage?
Interest rates are one of the most important factors in a mortgage, as they determine how much extra you will pay over the life of the loan. Essentially, the interest is the cost of borrowing money from a lender, and it can significantly affect your monthly payments and the total cost of your mortgage.
Fixed vs. Variable Interest Rates
As mentioned earlier, a fixed-rate mortgage locks in an interest rate, while a variable-rate or tracker mortgage can fluctuate. It’s crucial to choose the right option based on your financial situation and risk tolerance.
Bank of England Base Rate
The Bank of England’s base rate directly influences tracker mortgages. This rate is reviewed periodically and can impact how much interest you’re required to pay. For instance, when the base rate rises, mortgage repayments for those on tracker mortgages typically rise as well. Those with Variable rate mortgages may see similar changes in payments.
High Street Banks vs. Independent Mortgage Advisors
When searching for a mortgage, many people naturally gravitate towards high street banks like Barclays, HSBC, and Lloyds. These banks often advertise enticing offers, but it’s important to note that they typically provide access only to their own range of products, which can be limiting. How do you know if their mortgage products are the cheapest or best for your needs?
The Limitations of High Street Banks
High street banks may have a more restrictive range of products due to their internal network and policies. They can often offer competitive deals, but if your financial situation is complex—perhaps you’re self-employed, have a poor credit score, or are seeking a specialist product like equity release—they may not be able to accommodate your needs.
The Advantages of Independent Mortgage Advisors
This is where independent mortgage brokers like EHF Mortgages stand out. Unlike high street banks, EHF Mortgages has access to almost every mortgage lender, including those who specialise in complex cases, equity release, and niche mortgage products. Brokers can tailor a mortgage solution that fits your unique situation, ensuring you get the best possible terms.
Independent brokers can often find products that you won’t see advertised by high street lenders. Furthermore, they can assist with complex income situations, such as those who are self-employed or have multiple income streams.
EHF Mortgages: Your Access to the Whole Market
At EHF Mortgages, we pride ourselves on offering a whole of market approach, meaning we can access mortgage products from a wide variety of lenders, not just one institution. Whether you’re a first-time buyer, looking for equity release, or in need of a specialist loan, we have the expertise to find the right product for you. Our goal is to provide solutions where others say “no”—offering guidance and access to products that suit your individual needs.
Conclusion and Next Steps
Understanding what a mortgage is and the various types of loans available is crucial when making the right financial decision. With EHF Mortgages, you’re not limited to a narrow range of products offered by high street banks; instead, you have access to the entire market. Whether you’re dealing with complex financial situations or just looking for the best possible deal, EHF Mortgages is here to help.
Ready to explore your mortgage options? Book a consultation today, and let us guide you through the process with tailored solutions that work for you.
