In an attempt to make mortgage loans more appealing to home buyers, HSBC has recently introduced the concept of the ?split loan mortgage?. An article on Scotsman.com explained that one of the most difficult mortgage decisions is to fix or float.
To fix a mortgage means that the home buyer will pay a fixed rate for the duration of the mortgage, regardless of interest rates. While this is good when the interest rate rises, the homeowner will miss the potential benefit of lower interest rates.
The split loan mortgage will make this decision easier, as it offers a way to both fix part of the mortgage and keep a variable interest on the remaining amount.
Specifically, the choice involves fixing 25, 50 or 75 per cent of the mortgage loan. The remaining amount is then place on a lifetime tracker, which will determine the interest rate?s influence.
The rate will depend upon the proportion of the mortgage that is fixed, combined with the deposit amount. For the first two years of the mortgage, the interest rates for the fixed and unfixed parts are the same.
Interest rates begin at 2.49 per cent for a 25 per cent fixed mortgage, up to 2.99 per cent for a 75 per cent fixed loan. Lower deposit amounts will be associated with higher interest rates, up to 3.89 per cent for a 20 per cent deposit, with a ?999 fee for booking.
Home buyers should therefore be very careful when making their long-term calculations to ensure that they are not trapped when the two-year fixed rate expires. Nevertheless, with the appropriate advice from experts, this new form of mortgage will doubtlessly encourage more entrants to the property market.
