Lending a leg up – the history of mortgages

The UK has around 11.8 million mortgages and the industry is currently valued at £1.1 trillion. The ability to borrow an agreed amount, in order to fund purchasing a house, is something that is often taken for granted, and mortgages are even seen by many as an unwelcome nuisance. Their benefits, however, have been enjoyed by millions, as without them, only those with significant sums of money would be able to own a home.

Making an investment in a home has long been viewed as a reliable way to use hard-earned cash. Putting money into a business may provide huge earnings in the long term, whereas investment in personal and savings accounts may offer a level of freedom with one’s earnings that is ideal in the shorter term. Regularly making mortgage payments, however, can offer much more dependable benefits in the future.

In general terms, a mortgage is the name for the process by which a property is pledged to a lender as security against the loan needed by the home owner to make the investment. The mortgage is agreed depending on the terms of the re-payments that must be made – the total amount may be paid back, for example, over 35 years, at an explicit cost per month. The lender will receive a larger amount than the original sum advanced, due to interest being added to the original cost, based on standard rates at the time.

The origins of the modern mortgage are much simpler than the immense system that has formed. The name comes from a French legal term meaning ‘dead pledge’ and represented a method to make sure a debt was re-paid absolutely, without being based on whether a piece of land produced certain amounts of livestock. The alternative, a ‘live pledge’, allowed the borrower to use only the product of the land as payment – the modern-day equivalent would be paying back only what is earned by working from the house.

Early forms of mortgages gave no rights to the borrower, however, and the lender (and owner) could sell the property at his leisure. Thankfully though, the courts of equity gradually began to protect the borrower – borrowers eventually achieved absolute right of reconveyance – culminating in the ‘equity of redemption’. With the rights of the borrower protected, the modern mortgage took shape.

There are currently over 200 mortgage providers in Britain, including building societies, banks, mortgage corporations, insurance companies and pension funds. To make sense all the deals on offer, comparison sites have become a more heavily-used tool, where prospective borrowers can compare mortgages for the best rates, and find the best deal for them.

With the large-scale reliance on mortgages in modern society, it is essential that borrowing money is as simple as possible. Although it may never be as easy as paying back a landowner directly for the use of a piece of land, the process can be made a little more painless by using tools such as comparison sites and advisors.