Home Loans UK

Your dream of buying a home just got a bit expensive.  With the Reserve Bank of UK hiking the CRR and lending rates by 50 basis points, banks have increased the interest rates on Home Loans.  What used to be an affordable prospect some years ago has turned into a nightmare for a lot of individuals.  Home Loans UK gives you a good insight into the current interest rates offered by various lending institutions and the process of obtaining a home loan.

Most financial institutions offer options to individuals between Fixed and Floating Rates of Interest.  The Fixed Rate plan ensures the same rate of interest for the entire duration of the loan.  Example, if you take a loan for Rs X for a duration Y years at a fixed rate Z, you would need to repay the loan at interest rate Z for the entire tenure of the loan.

The Floating Rate plan differs with financial decisions made by Reserve Bank of UK.  Assume you brought a home loan at a floating rate A for 20 years.  Two months after you brought this loan, Reserve Bank of UK decides to reduce the lending rates.  This would lead to banks reducing their interest rates. 

Reduction in interest rates would mean you have to pay lesser interest on the principal amount.  Alternatively, an increase in lending rates would lead to your home loan getting more expensive.  This phenomenon has been observed for the last 1 year when RBI has increased the lending rates multiple times.

Home loans UK are slightly different as it also offers individuals to opt for a Fixed Cum Floating type of interest scheme.  Under this, an individual would need to indicate to the bank the tenure for which the interest will be fixed, post that the loan would operate in floating rate of interest.

Most financial institutions offer home loans at a fixed rate of 13-14% for the entire tenure and floating home loans at a rate of 10.75-12%.  Many financial analysts feel that the current interest rates are overvalued and a correction is in store.  Analysts foresee the fixed interest rates to drop down to 11.5% and floating rates to come down to 9.25% in the next 2 years. 

Does this mean that Home Loans UK would get cheaper after 2 years?  The answer is “Yes”.  There is a caveat attached though.  The recent increase in the Home Loan interest rates have been linked to the sub-prime crisis in United States of America and a superceding global economic meltdown.  Gosh!  This would mean uncertain days await the UKn lending sector. 

A lot of people have tried to time the home loan market but to no avail.  Home Loans UK has seen a rough ride for the last 6 months.  Financial experts believed that the UKn Home Loan market would remain insulated from the happenings of other countries.  Well, the pundits have just about been proved wrong.  The UKn Economy has to prove its solidarity in days to come if the Home Loan interest rates have to stabilize