There are a whole host of factors that affect your monthly mortgage repayments and some of them you can influence, other you cannot help. So, what are they and as far as possible, what can you do? Well the most basic influencing factor for your mortgage repayments in the central bank’s base interest rate. If that goes up your bank might start to charge you more. If it goes down, then they might reduce payments.
And this base interest rate is governed by many factors itself, from the rate of inflation to who well the country’s economy is growing. But none of this can be influenced by the man on the street. But, just because the base rates change does not mean that your mortgage rates will change. If you agree with your lender a fixed or capped rate, amongst others, then you might be protected from some or all base rate changes. And that is something that you can influence when you first choose a mortgage.
Then we come down to what affects your personal mortgage rate. This is the rate that your future lender offers you when you apply for a mortgage, or remortgage. These factors usually depend on your financial history,
For example, a run or bad debts, late credit card payments and worse can see you paying a lot higher mortgage rate. Behaving with credit can mean that your future monthly repayments are less than if you were reckless.
Likewise, not being able to show a credit history can be a worry to lenders, so having some form of unused credit card can be an advantage. If you are worried that applying for one might be a temptation, just cut it up when it arrives.
Finally, your level of deposit will also affect what rate your lender offers to you. Someone with only a 10-20% deposit is seen as a huge risk and will usually be hit with a higher interest rate than someone with, for example, a 25% deposit.
By saving up a good sized deposit, borrowing off a family member or just simply choosing a smaller and cheaper property to start off with could all mean that you pay a higher deposit and are rewarded with a lower monthly mortgage interest rate.
These are just some of the different factors that affect mortgage interest rates – the central base rate; your type of mortgage; your credit history and your deposit.
By John Hester