Interest Rates … Interest Rates … Interest Rates.

They have dominated our newspaper frontage, television time and party talk for the last 18 to 19 months. And we have been lulled into the belief that a lower interest rate is automatically better than a higher interest rate. Yet many of us are fast learning that this is not always the case. What we see is NOT what we, always, get.

For example, in recent months we have seen bold headline interest rates in newspapers, financial magazines and online search engine advertisements saying …

“2.19% – Lowest Rate Available in the Market”

“Remortgage Now at the Lowest Rates Possible – 2.83%”

“Try this Tracker of 2.2% Before It Goes”

Although the mortgage rates shown above are just examples that have been adapted from real world advertisements, they are most definitely headline grabbers. Whether they be shown online or offline, at least one of these mortgage interest rates is likely to catch our attention.

The interest rate is primarily a headline grabbing device. The rate being promoted is real, of course, but the lender’s criteria to achieve that rate will often prevent many borrowers from ever getting it.

Consider the recent headline-grabber rate of 2.29% that was withdrawn from the market late March (09). Everybody wanted it – from mainstream residential borrowers to buy-to-let investors with an adverse credit history. Bizarrely, they all thought they could get it judging by the increased enquiries mortgage advisers received for the product.

What very few realised though was this product was a tough one for most people to take advantage of. According to the Council of Mortgage Lenders the average Loan-to-Value in January 2009 was 76%. Put another way, the average deposit or equity in a UK home was 24%. Yet this fabulous, headline-grabbing product required a 40% deposit – almost twice the average available. Furthermore, this mortgage product also required borrowers to have a “squeaky clean” credit profile.

That’s why the initial interest rate was that low. If you had a truly short-term financial “hump” to get over for the coming year AND you could meet the strict lending criteria, then the product was a match made in heaven. For example, on a mortgage of 150,000 and an interest rate of around 4%, you would have been saving more than 210 Pounds every month (or 2,520 Pound for the year). Maybe this product would have suited many women in the UK with mortgages that also wanted to clear a credit card balance rather urgently. According to Abbey Credit Cards, the average credit card balance held by UK women and the saving this mortgage product gave were roughly the same.

With base rates being at an all-time low and approaching zero percent, mortgage payments are great for mortgage borrowers … for now. But what about the medium term of approximately 2 – 3 years? The attractiveness of a fixed-rate becomes clear when it looks as though mortgage interest rates can only go up when they start to move again. From the start of the 2nd year of the mortgage there is considerable interest rate risk to think about before taking this product or any such mortgage with similar features.

True, it’s anybody’s guess when rates will rise again but we do know that lenders are predominantly offering the very lowest rates for the shortest possible timeframes, mostly 2 years or less (such as the one above). If you want a longer timeframe with a fixed-rate, be ready to pay a premium of 1% and more. Lenders, themselves, see considerable risks for the next 2+ years and have hedged their bets by offering variable-rate products in one form or another (e.g. Trackers, Capped-Rate and Standard Variable Rate).

The ultimate goal for anyone borrowing money is to get the most they need or require at the lowest possible rate of interest. This is true of all loans whether it be mortgages or any other loan for that matter. If there is a difference when it comes to mortgage interest rates and the “cheap” interest rates being advertised, it’s because a mortgage concerns our homes – the very roof over our head. That’s why it’s absolutely vital to look past the headline-grabbing mortgage rate and see if the product itself delivers what you need. Whether you do this on your own or with a mortgage adviser is a matter of personal choice for you. Just be sure to check the product very carefully, not just the mortgage interest rate on immediate display.

If you’ve been thinking about refinancing your mortgage, these low interest days may be the ideal time to take the plunge. The decision to refinance your mortgage can save you a lot of money if done the right way. Always contact your current lender when considering a refinance, to get to know the correct way to do a refinance. Check out this article for a few solid mortgage refinance tips.

Always do your research on interest rates and terms when considering a refinance. You will see that there are many ways to get better terms on your mortgage refinance.

The better your credit score is, the better the terms for your new mortgage. You will get better rates if your credit score is crisp clean. It signifies to the lender that you pay your bills, you pay on time and you take your responsibilities serious.

When looking at the option of a mortgage refinance, be sure to always request multiple quotes from multiple lenders. This allows you to accurately compare interest rates and terms from multiple companies. Make sure you let the lender know he is in competition wit other lenders. If you do that, many times you will get a better offer. Also, ask for a complete quote that includes all the lender fees.

When considering a mortgage refinance, consider loan amount, payment options and interest rates. You can go online and compare rates and terms in a very short time period. Many lenders advertise online and make it easy for you to compare rates.

A solid mortgage company can be worth it’s weight in gold when you have mortgage questions. In these days of crumbling banks and unstable companies, make sure that your lender has a good reputation.