Cash Back Mortgages offer an opportunity to take a cash lump sum, usually at the start of your mortgage. It can be a fixed amount or a pre agreed percentage of the amount of the loan.

Percentages range between 1% and 5% - but can be as high as 10% - of the mortgage amount.

Cash back mortgages are often not stand alone mortgage types, and can be added onto the other different mortgage types, such as trackers and fixed rate deals. In fact, pure cash back mortgages are quite uncommon.

The obvious advantage of a cash back mortgage is that it gives you some money at a vital time to enable you to buy items such as those mentioned above, or home furnishings, or you might choose to pay off your credit card debts, or use the cash to help pay off those fees that go with buying a house as discussed above.

Cash-back mortgages are often useful for first time buyers with the mortgage lender offering a lump sum of cash at the start of a mortgage, giving them a good start to their home owning life.

Of all the decisions you’ll have to make on your mortgage, the most confusing part is understanding interest rates.

Understanding what each type of interest means can help you make the right decision when it comes to choosing the mortgage you want to go with.

Variable Rate

This is one of the most common mortgages and probably the one that people relate to the most. It simply means that your monthly payments will be dictated by whatever the current interest rates are – so, if the housing market is good, you’ll probably see your monthly payments rise, whereas if the market’s in a slump, your interest rates and payments will be lower.

Tracker Rate

Similar to a variable mortgage but with one big difference – the interest rate is tied directly to the Bank of England, so whatever decisions are made there, you’ll find your interest rate is slightly above or slightly below, dependent on current rates.

Fixed Rate

The other most popular type of mortgage, since this keeps your interest rate fixed for a set period of time (usually between 2-5 years). This ensures that you know exactly what you’re paying month in and month out. Of course, the downside to this type of mortgage is that if bank rates fall, you won’t benefit from the lower mortgage payments that people on variable rates will enjoy. You’re also usually penalised if you decide to switch lenders throughout your mortgage term, often as much as 3-4 months worth of interest.

Capped Mortgage

Often seen as a mix of variable and fixed rate, a capped mortgage means that your interest rate will only go so high for a set amount of time. So, if your cap is 10% and the housing market crashes through to 10½% or more, you won’t pay the extra rates. However, there’s the added bonus that if the interest rates fall, you’ll make the savings that a variable rate mortgage would give you.

Discount Mortgage

Just as it suggests, this will offer you a discount on your variable interest rate for the first couple of years on your mortgage. However, although it helps reduce your early monthly payments, you still pay the same overall amount that you would if you take out a standard mortgage.

Cashback Mortgage

Excellent for the first time buyer especially, this offers you a cash rebate at the start of the mortgage, calculated as a percentage of your overall mortgage. You receive this cash instantly, and simply pay it back at the end of the mortgage. This is an ideal solution for anyone just starting out on the property ladder, or for anyone on a limited budget.

There are other types of mortgage as well as these ones, including current account mortgages and offset mortgages, which a specialist advisor would be able to discuss with you. Just knowing what’s available and whether it’s suitable for you or not can make a big difference in the long run.

Overwhelmed by all the mortgage advise you are being given?

First, get some free advice.  The company should not charge you for advice. They are there to help you through the process. If they want to charge you, then it may not be the best advice.

Next, decide how much you can afford to borrow. Be realistic on how much you can pay on a mortgage each month. Then look for houses in your price range.

Once you find a house, find a broker that deals in mortgages. They are much more helpful with people who have a house in mind because that is how they make their money. They only get paid when the mortgage is in place so they will try to get the mortgage for you.

The first thing you ask a broker is, “Do you provide a whole of market quotation?” If they do not, then simply thank them for their time and walk out. Not getting a whole of market quotation can cost you a lot of money.

After getting a first quotation, get a second quotation. You need at least two quotations. It can either be from two brokers or one broker and one from the high street.

Once you find a broker with a good quote, you can proceed to buying the house.

Northern Rock has revealed the enhanced competitiveness of its product range has seen mortgage applications jump by 70% in March, with the average loan to value of new lending just 48%.

The nationalised bank has published its trading statement for the first quarter, confirming gross mortgage lending for the first quarter was just £550m, with this representing mortgage completions in the period and not yet reflecting the impact of the planned increases in mortgage lending.

Mortgage redemption rates have slowed significantly, and are running at around half the average rate of 2008. The bank said its debt management strategies are beginning to pay off, with its stock of unsold repossessed properties falling from 3,620 in December 2008 to 3,200 at the end of March.

However, residential arrears over three months have increased to 3.67% from 2.92% in December. Northern Rock said it had noted tentative signs of improvement in early arrears trends, reflecting the investment in its debt management capability and improved affordability levels as a result of falling interest rates.

Gary Hoffman, chief executive at Northern Rock, said: “We are implementing our new business plan, which will enable us to move forward with our lending programme. The revised state aid application has been submitted and we are making good progress with the legal and capital restructuring of the business – which we expect to complete in the second half of the year.

“The economic environment remains difficult but our trading performance in the quarter was in line with our expectations and we saw some early signs of mortgage applications increasing in March, reflecting pricing adjustments to our current product range.”

Source:  Your Mortgage UK

The Council of Mortgage Lenders (CML) has welcomed the implementation of a Government measure designed to reinforce lenders’ policies of forbearance for borrowers facing temporary and resolvable mortgage repayment problems, to minimise repossessions.

Lenders’ actions, supported by debt advice, help develop affordable repayment plans for borrowers committed to getting through short term financial difficulties. Repossession is a last resort.

Lenders already show significant forbearance to borrowers facing temporary difficulties, to enable them to keep their homes where this is possible. This core principle is already underpinned by regulatory rules and industry guidance. The scheme is a helpful additional tool - although the CML does not expect that the guarantee will be triggered in many cases, as the scheme is aimed at borrowers who expect to be able to resolve their difficulties and resume full mortgage payments within a year or two.

Some lenders have confirmed their participation in the home-owner mortgage support scheme (HMS) under which the government will provide a guarantee in some circumstances against part of the risk of future loss that lenders face by allowing borrowers to under-pay on their mortgages for a temporary period.

Other lenders have concluded that, while they support the principle of reasonable forbearance, they would prefer to help their borrowers outside the scheme and without calling on government financial support. The CML sees HMS as simply one means to an end. What matters is how lenders are working with their borrowers through periods of difficulty where they believe these can be resolved, not whether they are using HMS in itself.

CML director general Michael Coogan said: “Lenders are working strenuously to keep borrowers in their homes where they have a good prospect of being able to get back on track and sustain their home-ownership in the long term. The government is helping, through changes to Income Support for Mortgage Interest, the mortgage rescue scheme, and now the home-owner mortgage support scheme.

“Lenders fully recognise their responsibility to keep people in their homes where repossession can be avoided. The fact that some lenders are utilising the new scheme and others are not indicates simply a difference in their approach to forbearance, not in their commitment to it.

“It is likely to be some months before it will be possible to assess the impact of the various industry and government measures. The CML expects to be able to update its forecasts on arrears and repossessions, taking into account these measures as well as the prospects for employment and the wider economy, over the summer. Current forecasts are for 75,000 repossessions this year and 500,000 mortgages in arrears of three months or more at the end of the year.”

Statistics show that fixed rate mortgages soared in popularity in the first three months of the year.

According to a new index by mortgage brokerage John Charcol, the proportion of borrowers choosing to fix their interest rate shot up from 29.1% in December 2008 to 47.8% in January, 67.4% in February and 80.9% in March.

The results are a clear indication that mortgage borrowers expect interest rates to rise in the future. The Bank of England Base Rate is currently at an historic low of 0.5%, but the Government’s ‘quantitative easing’ measures are widely expected to boost inflation in the future, necessitating rises in interest rates.

“The increase comes as a result of a combination of several factors, the most obvious being that with Bank Base Rate now at 0.5% there is only one way for it to go – the only questions being the timing and the scale and speed of the increase,” commented Ray Boulger of John Charcol.

Boulger also believes that the extremely large margins being charged on tracker mortgages have also pushed more borrowers to plump for a fixed rate.

Tracker mortgages are currently typically being charged at around 3% over the Base Rate, which is reasonably attractive at present but could get very expensive when Base Rate rises.

The most competitive fixed rates now available are priced between 3% and 4% for two and three year fixes while the best tracker rates are around 2.25% to 3% over Bank Base Rate giving a current pay rate of 2.75% to 3.5%.

The John Charcol index reveals a big jump in the number of mortgages taken out to buy property compared with remortgages, and a significant increase in the number of first-time buyers applying for homeloans.

Andrew Hagger of comparison website Moneynet.co.uk warned that once the UK housing market revives, competition between lenders will increase, with many offering ‘gimmicks’ which will make it tricky to calculate which is really the cheapest mortgage.

“It is vital that would be borrowers, whether first time buyers, remortgagers or movers check the true cost of any deal before signing on the dotted line,’”he said.

“With a range of rate/fee combinations, there is no one deal that fits all, and with fee-free and percentage fee deals only adding to borrower confusion, finding the true cost of a mortgage is key unless you want to be needlessly pouring money down the drain.

“Don’t assume that a low rate or no fee deal is best. It’s essential that borrowers always compare the total cost of the mortgage they are looking at and not be swayed by a low rate or no fee deal,” added Hagger.

Reported by Your Mortgage & Remortgage

BBC News has recently reported that Mortgage lending picked up in March, according to figures from the Council of Mortgage Lenders (CML).

Gross lending stood at £11.5bn, up by 16% from February but still less than half the amount lent in March 2008.

Earlier HM Revenue & Customs (HMRC) figures showed there had been a 40% jump in home sales in March.

The CML said the March increase was a normal seasonal rise and warned that lending and house sales would remain low for the “foreseeable future.”

Despite the jump in March, the lending figures for the first three months of the year were the lowest for any quarter since the start of 2001.

However Michael Coogan, director general of the Council of Mortgage Lenders (CML) said the latest figures were a step in the right direction.

“It’s a seasonal factor here that people start to look around to move house in the middle of the better weather,” he said.

“What we said at the beginning of the year was that we expected over the course of 2009, £145bn to be lent, and we are on track with that forecast, and that has to be compared with £363bn in 2007,” he added.

Picking Up

A growing number of indicators now suggest that sales may have hit rock-bottom after the dramatic slump of 2008, and could now be starting to rise.

The HMRC’s figures showed 60,000 property sales in March worth at least £40,000 each, compared with 43,000 in February.

The number of mortgages approved but not yet lent, a key indicator of future activity, has also risen recently according to the Bank of England.

And during the past few months estate agents have been reporting a rise in the number of enquiries from potential buyers.

“House price activity is beginning to pick up to a limited extent in response to the substantial fall in house prices from their 2007 peak levels and markedly reduced mortgage rates,” said Howard Archer, chief economist at IHS Global Insight.

Elizabeth Coleman from the The Sunday Times recently reported that Homeowners who locked into expensive fixed-rate mortgages a few months ago could be thousands of pounds better off by exiting early and paying penalties. Advisers are urging borrowers who locked into deals at the height of the credit crunch to break their contract, despite exit charges and rising remortgage fees. Borrowers with a 25% deposit who took out Nationwide’s two-year fix at 6.25% on a £200,000 interest-only loan in June could save £4,489 if they switched to Cheltenham & Gloucester’s 4.79% tracker.

That is even after forking out Nationwide’s 1.5% early redemption charge and C&G’s £2,094 upfront fee, according to independent broker Savills Private Finance.

Those who have a 40% deposit could do even better by applying for HSBC’s market-leading 3.99% lifetime tracker with a £799 fee — saving £8.900 on the mortgage. Swap rates, used to price fixed-rate loans, have fallen to 3.24% from 6.45% five months ago. That has brought down the rates offered to consumers. The best two-year fix, from Abbey, is now 4.79%, compared with 5.74% from Britannia a month ago. The best tracker is HSBC’s lifetime deal at 3.99%, compared with 5.59% from Woolwich last month, according to data firm Moneyfacts. Les Jacobs, of Mortgage Monitor, the broker, said: “We’re seeing many frustrated homeowners who locked into deals in search of stability, but are now paying over the odds. “Review — and you can yield huge savings.” With Bank rate expected to come down again next month, after this month’s 1.5 percentage point cut, trackers are in demand, but are difficult to find. A mere 30 two-year trackers are on offer today compared with 68 a month ago. Nationwide, the UK’s biggest building society, is not offering any at all despite cutting fixed rates last week preventing new borrowers taking advantage of further interest rate falls. It said it was reviewing its range and would re-enter the market “in due course”. However, you can still save money by moving from one fixed rate to another as David Roberts, 40, of Chigwell, Essex, found. The print company owner had been paying the Woolwich 5.84% since November on his £400,000 mortgage, but has moved to Abbey’s 4.49% rate. He stands to save £5,000 over the two-year term of the loan, notwithstanding his old lender’s 1% early payment penalty and Abbey’s £995 fee. He said: “When I was looking to remortgage at the end of last year the Woolwich deal was the best but when our broker suggested we switch and pay 1.35% less we jumped at the chance.” n Scottish Widows has become the latest lender to launch a rate that tracks above, not below, its standard variable rate.

Melanie Bien at Savills said it signalled lenders were becoming less inclined to peg variable rate deals to Bank rate.

Research recently carried out by Moneyextra has revealed that 595,000 Brits are looking to downsize within the next six months.

The research also revealed that over one million people in the UK are currently looking to make the most of falling prices and buy a property.

When looking at the typical house price of an average first-time buyer property (£130,000), monthly repayments can come in as low as £592.92, making this an affordable opportunity for many currently renting.

For those‘downsizing’, Moneyextra found that extending the term of the mortgage and downsizing from a £200,000 mortgage on a £250,000 property to a £144,000 mortgage on a £180,000 property, could save as much as £555 per month on monthly repayments as well as freeing up some additional capital.

Richard Mason, managing director at Moneyextra, said: “Our research shows that while 4% of homeowners are considering a move to a smaller property, a staggering 8% of homeowners are ignorant to the current economic conditions and still don’t know what to do. The UK needs a wake-up call. Homeowners who are struggling with mortgage payments need to take their heads out of the sand or potentially face repossession.

“We’re urging people not to close their eyes to the opportunities and risks out there. There are still plenty of deals to choose from and significant savings can be made from downsizing. Our analysis shows that people who are struggling with their outgoings need to act fast - if they do so then collectively they could save nearly a third of a billion pounds every month - more than £550 each. Those looking to downsize now are making the right decision - move before you get into any serious difficulty to avoid the danger of repossession.”

Recent figures show that the number of new enquiries from househunters increased for the fifth consecutive month in March, and at the fastest rate since September 2003.

According to the Royal Institution of Chartered Surveyors (RICS), bolstered demand led to a rise in the number of actual sales.

The RICS monthly data, derived from a regular of chartered surveyors in England and Wales, indicated that interest from new buyers was strongest in London, with 63% more surveyors recording a rise than a fall in new buyer inquiries, up from 46%in February.

Overall, 31% more surveyors reported a rise than a fall in new buyer inquiries, up from 21% in February.

However, the recovery in interest levels has not been matched by the number of properties coming onto the market for sale. That number continued to decline, dropping to the lowest level since September 2007.

Ian Perry, a spokesperson for the RICS, said: “Buyer interest is starting to gain momentum but will remain frustrated while mortgage finance is scarce. Accessibility for first-time buyers is likely to remain difficult.”