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First-time Buyers: Beware of Introductory Mortgage Offers!
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If you're a first time buyer, it's important to do your research in order to avoid the allure of attractive introductory offers and cushy fixed rate mortgages.
First-time buyers are facing a range of problems In today's booming property market. For instance, the Council of Mortgage Lenders (CML) found that in April 2007, first-time buyers were paying 18.7 per cent of their income on mortgage interest payments - a figure that's up over two per cent compared with the same month the previous year. Moreover, first-time buyer mortgages are now over three times greater in value than the average income of the borrower, according to the CML.
But while a variety of banks and building societies offer specialist first-time buyer mortgages, the CML has recently released research which suggests that some introductory mortgage offers for first-time buyers can be deceptive. According to the trade association for mortgage lenders, many first-time buyers are tempted into accepting particular mortgage deals because of their introductory offers - a decision that doesn't pay heed to the importance of shopping around for a mortgage that may, in the long-term, be more financially viable.
Christopher Dean, a spokesperson for the CML, has claimed that starting offers for many first-time buyer mortgages can be likened to a "double-edged sword", and recommends that first-time buyers should "keep their eye on the ball" in order to find mortgages that will be more affordable on a long term basis.
If you're a first-time buyer looking for cost effective mortgages, it's important to do your research in order to avoid the allure of starting offers and find the mortgage that will best suit your financial circumstances in years to come. Many online consumer comparison sites offer comprehensive mortgage information, so you'll be able to arm yourself with the essentials before making a decision on a mortgage that you'll probably be burdened with for many years to come.
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As well as being sucked in by attractive introductory offers, many first-time buyers also choose to opt for fixed rate mortgages on their first house purchase. Fixed rate mortgages offer consumers a fixed rate of interest for the first few years of their mortgage repayments, thus making it easier for first-time buyers to plan out the next two or three years of their financial lives with more certainty.
However, the dangers of fixed rate mortgages manifest themselves after the fixed term is over, as many borrowers coming off a fixed rate mortgage in 2007 will realise. Since August 2006, the Bank of England base rate has increased four times and borrowers who were previously enjoying the stability of a fixed rate mortgage will now have to accommodate the interest rate hikes of recent months into their repayments.
What's more, many online mortgage sites offer a handy mortgage calculator that lets you know how much you can borrow depending on your current situation. And whilst many mortgage lenders have standard multiples they use for borrowers in particular income brackets, there's always the possibility that they might be flexible depending on your individual circumstances.
Author - Paul McIndoe - Finance advisor in London
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