It would seem obvious that you should take out a mortgage when you want to buy a house. Most people make the decision to buy a house when they leave home, get married or move to a new area or it might be when they have saved enough to pay the deposit. However, there should be more to the decision making than that.
It can be a good idea to have a think about what the base rates are doing. These are the interest rates that the Bank of England charge to the banks to lend money. If these re low, then the mortgage rates will be low but if these are high, then the mortgage rates will be high.
Over the twenty five year term of your mortgage, rates are likely to fluctuate a lot and it is impossible to predict what they might be over the years. However, when you first start out with your mortgage it is likely that you will be least well off that you will be over the full term of the mortgage. This may sound odd, but you are likely to experience pay rises and change to jobs that pay more money over the years. This means that you will become more and more capable of paying the monthly amounts. The main exceptions to this would be if you were unwell or lost your job and it can be possible to insure against these, so the monthly payments do get paid in these circumstances.
Therefore, when you are first starting out, it can be a good idea to borrow when the interest rates are low. This will mean that when you first start off paying, you will have nice low premiums to pay. It is useful, when you are setting up home, because you will be likely to want to be buying things for your house and therefore will be glad of the extra money. Of course, as soon as the base rates start to rise, you will need to pay more money as it is likely that the lender will increase the amount that they charge you. Hopefully you will be a position where you can afford the rate increase. It is good idea to think about this when you are deciding if you can afford a mortgage and consider what you might do if the rates go up. Hopefully you will allow for this when you consider whether you can afford a mortgage. When rates are very low, even a small increase can make a significant difference to what you are paying and so it is important to consider this.
