Mortgages are loans for buying homes. The mortgagee (the company providing the mortgage) has to provide a large sum of money to enable the mortgagor (the borrower) to buy a house or flat, and spread the repayment of capital and interest over a long period, say 20 years. From the lender's point of view, this means lending long and borrowing short. This tends to go against the tradition of bankers. So specialist companies called building societies were set up solely to handle the home loans business.
In a mortgage agreement the house buyer agrees to make monthly repayments, insure the house and take out life insurance. The building society keeps the title deeds of the property as additional security. In this way, the building society has complete security even if the house burns down or the mortgagor dies. Where the building society cannot obtain enough money from depositors it can borrow on the money markets. This means that the amount of money paid by house buyers each month varies from time to time according to variations in the interest rate.
It is also possible to obtain fixed interest mortgages. The advantage of this is that home buyers know exactly how much money they have to find each month throughout the term of the mortgage. This enables them to plan their financial affairs more exactly. The disadvantage is that the loan may be taken out at a time of high interest rates which the borrower has to continue paying although market rates fall. So the borrower is paying more than the current cost of borrowing. If market rates go up then the opposite is true and the fixed rate mortgage is an advantage. Then the borrower is paying less than the current cost of borrowing.
During the 1980s the financial services industry was deregulated, which meant that many government controls were removed. Building societies started to do banking business and offer interest-paying current accounts to their savers. To meet the competition banks started to provide mortgages and many other services traditionally provided only by other specialized institutions.
Vocabulary:
mortgagee A mortgagee is a company which lends money to buy a house.
mortgagor A mortgagor is an individual or a legal entity who borrow money to buy a house or flat.
lending long Lending long means granting long-term loans.
borrowing short Borrowing short means having short-term debts.
a building society Building societies specialize in granting long-term loans for buying homes.
Дата добавления: 2015-08-20; просмотров: 67 | Нарушение авторских прав
| <== предыдущая страница | | | следующая страница ==> |
| Exercise 3: Complete each space with the appropriate word or words. | | | TAXES AND PUBLIC SPENDING |