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Mortgages From the Past and the Present

Aug 18, 2007
This is truly the age and era of mortgages. If you want to buy a house, it is likely that you will be overflowing with deals from all kinds of finance companies and loan providers as they try to lure you. Each loan provider will advertise to you, the best possible loans that they have on offer. If you are on the lookout for cheap mortgages, just relax. Most loan providers have an array of loans and mortgages to fit the budget of the house buyer.

In the world of today it is hardly possible to finance all our necessities directly from our savings. Loan providers understand that and are willing to present you with the ideal mortgage offer. Over the years we have seen various developments in the world of personal and housing finance. One popular loan type that had emerged some time ago in the United Kingdom was the endowment mortgage.

Although endowment mortgages are relatively unpopular now, there was a time when people considered it to be a great bargain. Endowment mortgages allowed people to pay only the loan amount every month. But how would the mortgage company benefit from this?

When taking out an endowment mortgage, the borrower was required to take out a life assurance policy for the period of the loan. These mortgages involved long term commitment and the duration was generally about twenty-five years. How did this help? The interest-only policy allowed the borrower to save up enough to repay the loan. However, if he was unable to do so, the life assurance policy that he had taken out would help repay the mortgage.

Sounds very simple doesn't it? However, there was one tiny glitch. Now, the repayment of the loan would depend on the endowment funds. Thus, it became necessary that the funds into which the investments were made should perform well. Of course, you never can say when things can take a downhill turn.

After the initial popularity of endowment mortgages in a flourishing market where people actually got bonuses over and above their investment, there was bound to be a shift. A definite shift came in the early 1990s, when the UK markets plunged into recession. There was a major market collapse which adversely affected many endowments. The disaster was so bad that companies had to revert to repayment mortgages.

Endowment mortgages have never recuperated from the blow dealt to them. And why should they? After all, the markets are overflowing with all kinds of attractive loans. Determine what kind of a loan you are looking for, and prepare yourself to be attacked by loans of all kinds.
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