Helping Innovate Property (HIP) – Blog, Housing Market News and Articles

The significant and dramatic reductions in the Bank of England interest rate in the past few weeks has seen a flurry of interest in the area of tracker mortgages, that is those that follow the base rate to at least some degree.

The average tracker mortgage, according to available data, has fallen from 6.27 percent in October of this year to only 3.27 percent now, in early December. So what does this mean for the consumer?

How much can be saved with a tracker mortgage?

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Early December saw the UK Government promise a guarantee to homeowners that find themselves in trouble with their mortgage repayments in an effort to stem the expected tide of repossessions that many see as a result of the current economic crisis.

The scheme is aimed at those who find themselves redundant with a mortgage to pay, as such individuals are expected to become more numerous with companies going to the wall thanks to the ‘credit crunch’ that is sweeping the country.The details of the proposal are quite specific, and will only be available on mortgages below a £400,000 limit.

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In a move that will have surprised many market analysts the major UK back HSBC has announced plans to increase its mortgage lending in 2009. Despite the current downtrend in both lending and housing sales the bank clearly sees an opportunity to be exploited, and it could be that this speck of light at the end of the tunnel may spur other lenders into looking at the future with renewed optimism.

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Many people are reluctant to consider the option of re-mortgaging given the current financial crisis, but it is something that everyone should keep in mind as there can be considerable savings to be made. Here are some thoughts when considering re-mortgaging:

1: Plan ahead – for those on a fixed term deal, keep in mind when your current package comes to an end and begin looking for alternatives a few months in advance. Securing a mortgage can be a lengthy process and making tracks in advance can be advantageous in making sure you get the right deal and at the right time.

2: Shop around for the right deal – The rise of comparison websites allows easy access to view a large number of varying types of mortgages and their specific terms and conditions. Remember that what looks like a very small percentage difference can amount to a very large monetary difference over the term of the loan – make sure all the information is given to you in plain and simple, and easy to understand, terms.

3: Once you find the right deal, make sure you secure it as the recent turmoil in the financial industry has seen lenders resort to withdrawing deals at very short notice.

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A poor credit record and rating can be a millstone around ones neck for a long time and a serious stumbling block when looking for a mortgage.The current economic crisis has not been an assistance to those with a poor credit rating; lenders who were once willing to lend to those with an adverse credit rating are becoming more difficult to find.

Perseverance is the key. It is by no means impossible for someone with a poor rating to secure a mortgage – there are a few things one can do to help the process.

The first, and most important point to think about when looking for a mortgage is the deposit you are able to put down. Having a poor credit rating can be as a result of circumstances that are long in the past and you may have managed to save a sizeable nest egg with which to apply leverage to the lender.

It is vital to stress just how beneficial this is, as a large deposit may open doors that may remain locked to those with little to offer.

Lenders will be more willing to negotiate with a potential buyer on a sliding scale that measures how much, or little of the capital they are needed to advance – the less the better, especially in the current climate of tightened financial belts.

A further factor to take into account is the lender itself: there are many lenders on the market who specialise in adverse credit mortgages and loans; whilst these companies were once viewed as unscrupulous traders all mortgage lenders must be and are now fully licensed.

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The buy to let market in the UK has been the subject of much speculation of late, with the press continuing to announce the premature death of the process. This may be proven to be wide of the mark for future investors with cash in their pockets and a long term view.

Landlords who entered the market in recent times (2006-2007) are likely to be in negative equity and those whom were highly leveraged are going to face challenging times as the mortgage market tightens its belt.

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The worldwide economic downturn that has swept the financial markets has led to a serious decline in UK house sales and many construction companies have halted exisiting builds and made widespread redundancies.

This trend looks set to continue for the foreseeable future – most news agencies are forecasting a two year slump in sales and new builds – but what does it mean for the first time buyer?

To raise a cliché, there is good news, and there is bad news – which would you like first?

We will start with the bad news.

Finding a mortgage is going to be more difficult than for many a year as banks and lenders tighten their belts. The days of lending freely and willingly, especially loans of five and a half times ones salary are gone.

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For the past ten years UK property has been a certified blue chip investment in the UK. Anybody who put their money into property ten years ago has seen their investment gain in value beyond expectations – until now.

The financial crash that has swept the world in the past few months has exerted an influence on the housing market to an already notable effect as the doom and gloom of predictions in the daily press have risen. Forecasts of a fall in prices over the next two years up to 30% have been popular and has cast a dark cloud over the UK housing market

What is then the truth about the prospects of property investing in the UK – is the market in terminal decline or is there a future in speculation?

While prices are no doubt set to continue to fall, there has to come a point where things level out – bricks and mortar can never be worth nothing after all. Potential investors in the market continue to closely read and follow the property news and analysis in order to determine just when this is likely to happen.

Predicting the trends in the housing market is considered by many to be something of a dark art but that need not be the case. Keeping a close eye on the press and housing prices in the area intended for investment, should give the interested observer an indicator of the severity of the fall to come.

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I have decided to join in the Twitter revolution on behalf of HIP-Consultant.co.uk. We are probably a little behind the times in utilising this great online information sharing tool but better late than never. Twitter is a free social messaging utility for staying connected in real-time to people you would like to ‘follow’ or allow to ‘follow’ you.

Initially we will be using Twitter to stay informed of updates from sites and blogs we regularlry read. This is already paying dividends allowing us quickly and easily to see and read what is happening and as it is published. So, after the first few days we have gained a few followers and are when time allows looking for others whom participate in our related field to follow.

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It is a nightmare scenario in which the value of your property falls below that of the loans secured on it and it is likely to affect a great number of homeowners in the coming years thanks to the worldwide recession.

In fact, estimates put the number of homes falling into the negative equity zone at over two million by the year 2010, with over quarter of a million having joined the statistics in the last few months.

What should you do if you find yourself in the negative equity trap?

First and foremost, a couple of important points: your mortgage lender wants his money, not your house, hence repossession is very much the final option. The bailiffs will only be despatched to your door as a last resort. Also, house prices fluctuate – what is falling now may be rising in a few years – and negative equity will affect those who have to sell their homes while in the trap. If you can stay put for a while, do so, and you should find yourself climbing out of the zone in time.

Try and reduce the debt

At the first signs of negative equity – and for those who are unsure, this is the point where the market value of your property becomes less than the mortgage secured upon it (and any other loans that may use the property as collateral) – the thing to do is take stock. Investigate ways of cutting the debt – many mortgage lenders will have an option available to pay off a chunk of the mortgage, generally up to ten percent – by using available funds. Of course, you should not consider taking out further loans, but if you happen to have savings then it may be worth using these to reduce the mortgage amount repayable in the first instance.

If paying off some of the loan is not an option you should still contact your lender, and straight away.

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With the current financial crisis impacting on house sales, those looking for extra space may be well advised to extend rather than sell, adding value for when the market picks up following the fall.

Among the most proven of additions is the loft extension, a way of utilising space that tends to be disregarded and becomes a store of junk. There are a number of steps you should take if you want to think about converting your loft to living space, and the best way to start is to get up there and have a look.

Things to take into account are the pitch angle and the height of the roof. The general rule is that you must have 2.3 metres height for decent headroom, and remember that the use of ‘dormer’ style windows – those that project horizontally from the roof – can give extra headroom at the eaves.

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