Mortgages

Mortgages are a form of secured lending where a large amount of money is lent to a company or an individual in order to purchase a property. They are usually repayable over a long period of time - much longer than a typical loan - and the lender can repossess the building if repayments are not made on time or the borrower defaults.

Most mortgage lending is done to individuals who require the money to purchase a house, but could never afford to pay the purchase price on savings and cash alone without having to save for years and years.

The rate of interest on a mortgage is rarely constant over the period of the loan. This is because with mortgages tending to be over many years, sometimes up to 40 or more, the lender wishes to have some ability to raise rates depending upon market conditions, usually only allowing borrowers who wish to have a fixed rate of interest to fix it for up to five years. Due to the large amounts of money involved, a change in the rate of interest can have a significant effect upon the ability of the borrower to repay, as even a 0.25% rise in interest rates can increase the monthly amount due to be paid. For those with little disposable income, this increased cost can often result in them defaulting on their mortgage repayments and their home being repossessed.