Owning a home is the most important dream of any person. It is one of the basic necessities of life as stated by Maslow in his
‘Theory of Hierarchy of Needs’. People generally desire to have a home which not only gives them shelter, but also should be the expression of their artistic tastes, and an object of pride. Owning a home is a matter of spending on life’s savings. For some- belonging to the high earning group, is not a problem; but for others arranging finances for their dream home is a very crucial decision, they ever take in their life. To enable people to realize their dream, financial institutions and banks offer home loans to people.
Home loans play a very important role in the lives of UK nationals. Every year there are borrowings worth billions of pounds by the UK nationals for home loans. Nowadays, home loans have become a necessary part of life as it is not essential that one has the necessary amount of money to finance his immediate requirement for purchasing a home. One can avail of home loans, after signing a document with a financial institution on a specified amount of money to go with the purchase with that borrowed money. Lenders and financial institutions keep the house or any other residential property as collateral. In the UK, home loans are offered by innumerable financial institutions at various APR. The amount of loan approved usually depends on the income and assets of the borrower and his capacity to pay back the loan.
In the UK, home loans offered are of two types:
Fixed-rate home loan
Variable-rate home loan
Fixed-rate home loans are offered to borrowers at a prefixed rate of interest for a specified time period. In case of upward fluctuations in interest rates in the market, customers enjoy the benefit of not paying any extra sum of money on the increased rate of interest. Variable-rate home loans, on the other hand, are left to the mercy of lenders and government regulations. In case of an upward trend, the borrowers have to tighten their budgets.
With the ever-increasing competition in the market, more and more financial institutions are offering home loans at lower APR along with customer-oriented services. All companies claim to be the leading loan and other financial services provider with the best service. In order to tap the growing market companies and lending institutions are coming up with more innovative products to cater to the requirements of all the customers. With the advent of the internet, the services offered have become more fast and efficient. Now one can compare the best rate offered in the market at the click of the mouse.
The complications in homeowner loans fall when the borrower defaults in the payment of the monthly installment. In many cases, it has been seen that lenders start charging more interest rate than the standard rate. Wise borrowers, in such a situation, switch over to a new lender for a better rate of interest and fee waivers. This is termed as remortgage. Remortgage is a very prudent way of avoiding a heavy interest rate. There are innumerable agencies that suggest better remortgage options to the borrowers.
Moreover, with a gradual shift from the sellers’ market to the buyers’ market, the ultimate beneficiary is the customer. Companies even offer value-added services to the borrowers to evolve brand loyalty. Companies are even leveraging strength from modern management practices and corporate governance. In the long run, a company that offers the best financial solution with the right set of marketing mix will win the race.