15 years Fixed Low Interest Loans
People have to borrow huge amount of money to purchase a house in UK in the present days, since, the price of property are increasing at a very high rate. Variable interest rates for loans would put a borrower in a weak position if the interest rate continues to rise. Low interest loans have been introduced to protect the borrower from interest hikes.
In low interest loans, the interest rate remains the same even if the Bank of England’s variable interest rate increases. Usually low interest loans are granted for a long period such as 20 years or 30 years. The most recent announcement is the loan for a period of 15 years. Low interest loans are usually portable and could be carried with the borrower even if he wants to change home. The interest rate is comparatively very less compared to other loans (5-Year Fixed Rate Mortgage at 4.99%, 2007).
The borrower has the advantage that he could have a clear idea of the amount to be paid every month for 15 years and therefore plan other expenses accordingly. Two classes of people would appreciate low interest loans. Young generation with sufficiently high income who would like to own a home before their children start going to college and older generation who would like to own a home before they retire. They could also generate a large amount of money by home equity if they want, in the future. However there are disadvantages also.
The monthly installments would be more compared to a 30-year loan. Since the total interest paid is less the tax deduction on this account would be less (15-year Fixed Rate Mortgage, 2007)
Thus, low interest loans are a boon to people who want to own a home in UK within a short period of time without having the fear of increase in interest. Although the monthly installment of the loan would be higher, the total interest paid would be almost half of the traditional 30-year loan.
