Libor Mortgages – Have They Seen Their Day?
By Jason Haines
One type of mortgage that you might not have heard about is the Libor mortgage. This is a mortgage that, like many other mortgages it tracks a rate of interest. However unlike the vast majority of mortgages it does not track the Bank of Englands base rate, it tracks the London Inter Bank Offered Rate.
Mortgage lenders who offer a Libor mortgage will track the Libor base rate and apply any changes in it accordingly to the interest rate of their mortgages. Many of the mortgage lenders that will offer a Libor mortgage are lenders who deal with sub prime mortgages (bad credit mortgage) and self certification mortgages. Both of these types of mortgage are seen as more risky than many other mortgages and as a result have higher interest rates. Sub prime mortgages for example are usually given to people with a poor credit history and little equity. Self certification mortgages rely on the borrower to provide all their financial details, often if they are self employed.
Mortgages and the Credit Crunch
Many mortgage lenders have stopped offering bad credit mortgages and self cert mortgages as they continue to reduce the amount of risk they are prepared to take in their mortgage lending. In 2008 there were over twelve specialist mortgage lenders offering self cert and bad credit mortgages, today there are less than five. There are still lenders offering libor mortgages but at the time of writing this article there is currently only one lender offering libor mortgages in the UK.
Pros and cons of a Libor mortgage
If you are thinking about a Libor mortgage here are some pros and cons of them
Pro
If you are in, or have been in financial difficulty you may find that you are accepted for a Libor mortgage. As a Libor mortgage tracks the London Inter Bank Offered Rate every three months it may take longer to apply any interest rate changes than a mortgage that tracks the Bank of Englands base rate.
Con
You may have to pay a higher interest rate with a Libor mortgage.
Libor mortgage advice
To read more information about a Libor mortgage you can visit one of the many mortgage comparison websites. If you would prefer to speak to a mortgage advisor then get in touch with an independent mortgage advisors to give you professional mortgage advice with no fees tailored to suit your financial needs.
About The Author
Jason Haines is a protection and mortgage advisor at godirect.co.uk, one of the UK”s most trusted information site about personal finance. one of the UK”s most trusted information site about personal finance.
http://www.godirect.co.uk/mortgage-repayment-calculator.php