Mortgage Products - Interest %

funky1471

Hi,

Just a quick one.

With mortgage products, does a lender set an interest rate for that product, and then anybody who applies and gets accepted for that product (whether its a 2yr fixed, 5yr tracker etc) gets the same rate?

Where as with an unsecured loan, you apply, and if accepted, you get told the rate they can do the loan for, based on your credit, salary etc etc?

What i'm wondering is if say Halifax had 2 products (just quick examples, probably not realistic)

2yr fixed 5.45%

2yr fixed 2.99%

Would somebody with a lower credit score have more chance getting accepted for the 2yr fixed product at 5.45%, or are you given an interest rate after being accepted, with a better rate for less risky borrowers?

Of course none of that could be right and it could be done completely differently?

Just i'm sure when looking through a list of mortgage products I saw 2 from Nationwide, same fixed term, but different interest rates - Are the lending criteria different for the two separate products?

Thrugelmir

Mortgages are priced on the basis of risk, allied to the underlying cost of the funds to the lender.

Lenders will set underwriting criteria accordingly to meet their target borrower.

So low risk borrower ( good credit rating) with above average earnings and having a sizable deposit. Will have the pick of the market.

As opposed to a borrower with the reverse scenario.

funky1471

So one lender could have different lending criteria for each of their mortgage products? Or do they just set the lending criteria the same for all their offerings?

Sorry if this is a stupid question :-)

ViolaLass

funky1471 wrote: »

So one lender could have different lending criteria for each of their mortgage products? Or do they just set the lending criteria the same for all their offerings?

Sorry if this is a stupid question :-)

Different lending criteria. So if you get offered a certain product, you WILL be offered the advertised interest rate.

kingstreet

A lender is prepared to lend to you, or not.

The choice of product does not influence the lending decision.

Once you are deemed credit-worthy you will have the pick of that lender's products for which you qualify by dint of LTV, income multiple etc.

funky1471

kingstreet wrote: »

A lender is prepared to lend to you, or not.

The choice of product does not influence the lending decision.

Once you are deemed credit-worthy you will have the pick of that lender's products for which you qualify by dint of LTV, income multiple etc.

Thanks for clearing that up, just wanted to be clear on how it's different to when taking out an unsecured loan (In terms of the interest), where you don't know the interest rate until your'e approved.