Every Friday we aim to post an answer to a FAQ about mortgages, tax, investments, money matters, business or retirement. You can have your say too. Send an email with your FAQ to [email protected]
This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
Q: Who and what decides mortgage rates?
Answer: While mortgage rates are predominantly based on the Bank of England base rate,it is not quite as simple as that.
While the base rate certainly is a huge influence on interest rates in general, tracker mortgages are really the only mortgage type that is based on the BoE rate alone.
For other types of mortgages, a shift in the base rate sets off a chain of events that may affect mortgages rates, either directly or indirectly.
This claim is substantiated when you compare the base rate, which has largely remained unchanged in recent years, against mortgage rates, which have steadily declined.
Other factors include competition, economic strength, favourable lending conditions, and lowered risk of default.
Don’t forget about mortgage fees
Lenders add fees to your deal to cover their costs, which must be taken into account when determining what your total mortgage rate will be. These include, but are not limited to:
- the costs required for borrowing funds
- managing the risks associated with borrowing and lending
- the cost of retaining the money required for lending
Fees will differ from lender to lender and even from deal to deal, always ensuring a level of profitability when finalising the rates they advertise.
As specialist mortgage brokers to the medical and dental professions, Dental and Medical Financial Services are committed to helping doctors navigate the mortgage process.