WembleyWonderful Tips #57: A Guide to the UK Mortgage Jungle

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Mortgages (=prêts immobiliers) work very differently in France and in the UK; and for many non-Brits it is quite a challenge to find their way in the UK mortgage jungle. So here is a quick guide.

First, the mortgage market is much more flexible in the UK than in France . In France, people tend to approach the bank where they have their accounts, cards etc when they need financing for a house. In the UK, it is strongly recommended to shop around, as mortgages are offered by a myriad of different players; and high street bank are usually not the most competitive. MoneySupermarket is a good place to start when you’re looking for a mortgage, as it offers a comparison of the different mortgages available from various providers.

Second, mortgages work differently depending on what you want to do with them – whether you want to buy a house for the first time (first-time buyer), buy a subsequent house, buy a house to let it (buy-to-let); renegotiate your existing mortgage (remortgage); or buy a house and make extensive works on it (development mortgages). Terms, conditions and lending rates will differ from one case to the other; and also depending on the size of your mortgage – very often the super cheap rates advertised are not available to you…

Third, most UK mortgages work on floating rates while in France most work on fixed rates. This means that you will not be able to agree a 5% rate for the next 30 years; but instead that the rate you will pay will follow the movement of the Bank of England short term rates. Obviously, it is great when interest rates are going down but less so when they are expected to rise – somehow you are making a bet on this when you take on a mortgage. Some mortgage providers will offer 2 to 5-year fixed rate, meaning than the rates will be stable for the agreed period but then will revert to floating.

Fourth, in most cases it is possible to make early repayments on your mortgages , i.e. repay the capital you have borrowed more quickly than the initial schedule. In effect, it means that the mortgage you had initially agreed to last 30 years can be reimbursed quicker; and therefore that you will pay less interest over the life of the mortgage. It also means that if you find a cheaper deal elsewhere, you can very easily remortgage , i.e. repay the entire mortgage back to your initial mortgage provider by borrowing the money to the new (cheaper) mortgage provider.

Fifth, mortgage brokers can be of huge help you to find the best deal … and they are free! Mortgage brokers are financial professionals regulated (like all finance professionals in the UK) by the Financial Conduct Authority, usually working for a network, who provide objective advice on the best mortgages that would work for you. They are not paid by you but by the mortgage company, in a very transparent way (you get to know how much they are getting). And once your mortgage can be refinanced, they will tend to get in touch if they think they can find you a better deal than your existing one, taking off the trouble of you having to monitor your mortgage schedule. You can google them but I would strongly recommend using someone who has been recommended to you – my friend Mara could be an option! :slight_smile:

So overall a bit complicated but in my view much more tailored to customers’ needs!!

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