The Guide To Property Prices in 2011...
Oct 4th, 2011 James McHeggins
You have clawed yourself away. The dead money trap of rented accommodation has been left behind. Now, a fertile land of property ladders and structural interior design decisions awaits you. Whatever you have got it is yours, and you are doing everything possible to ensure that nobody is going to change that. So what is the last thing you want to happen? How about a recession, de-valuing your plot?
Well, that happened. But there is a solitary, property-related silver lining on the doom and gloom clouds of a recession era of economic fallout. The fact is, people might not be buying much, but many people with a mortgage are benefiting from low interest as the Bank of England refuses to budge the base rate past five per cent. There is speculation across the board at the moment when it comes to Britains balance sheets, both commercial and public. Interest rates or rather what could happen to interest rates is, naturally, often at the centre of such debates. With employment problems affecting more than just those out of work, people cannot afford increases in their outgoings.
So we contacted Helen Adams, Managing Director of FirstRungNow, a first time buyers specialist website. Then we asked what she thinks could really happen to homeowners if interest rates rise within the next year. "I am sure the low interest rates have been a godsend for many who have been able to take advantage of a large reduction in mortgage costs, for most of us, the largest monthly out-going," said Adams. "We may see a small rise in interest rates but the Government will be reluctant to make a big increase, not more than a percent in my opinion, as they want the public to carry on spending.
"I do not foresee mortgage interest rates rising that much but if they do go up, hopefully they will not go over any previous or unforeseen levels. When a borrower takes out a mortgage they should always consider affordability if the rates do rise. After all, just one percent can make a significant increase for some. If borrowers are finding it hard to afford their mortgage they should look carefully at their spending, but they can also talk to their lender to see if repayments can be restructured." In comparison with 1991, the last major dip in the UKs fortunes, so far we have got off quite lightly. The worst may still be to come, but in terms of residential repossessions, there have been notably less this year than initially predicted. Still, many people are finely tuning their finances like crazed chemists in cash laboratories.
But what if the first cracks are starting to appear, the balls of borrowed assets you have been juggling get harder to catch, and the speed at which you are expected to pay starts to feel faster? Ignoring letters and calls should never be an option, tempting as that may be. Everyone wants to get back on track, so knowing how to approach the problem is essential if you have any chance of achieving that. "This scenario should be avoided if at all possible, though it can be hard if you are getting behind with expensive store or credit cards. After you have cut spending down to the absolute minimum, the first thing to do is to speak to your lender," explains Adams.
"See if you can find another way of paying the mortgage, restructuring the payments. This might mean extending the term, changing the type of mortgage, or even taking a holiday from the payments. Beware, though, this will invariably work out more expensive in the long run." Message understood then. So the bank is happy enough, as the mortgage history is healthy. Now you can concentrate on correcting your cash flow in other areas. What is important to remember, though, is that it is doubtful anyone will see Browns fantasized no more boom and bust utopia emerging anytime soon. There will always be dips, just as (fingers crossed) there will always be peaks.
It is the nature of things, particularly within a financial system governed equally by suspicion and speculation, as it is fact and real financial figures. So we live in constant threat from the spectre of a falling property market. Surprising, then, that advantages can be taken at times like this. While a nation almost categorically struggles, there are, potentially, bittersweet rewards to be reaped from the money outstanding on our property, the one time it pays to owe.
"Property price falls leading to the situation where the property value is less than the amount you owe on it are not new. Neither is it necessarily anything to worry about too much. However, this situation can be a big problem if you have to sell as you would need to find extra money to pay off the mortgage," Adams told us.
"The best protection against negative equity in this market is to have increasing equity in your property. Whilst interest rates are low, this is the perfect time to overpay on your mortgage if you can afford to, and build up your equity stake. "It will save you interest in the long run and put you in a more secure position. One way to protect against rising interest rates is to take out a fixed rate mortgage or switch to one. This makes it easier to budget though you may incur some costs to make the change. It might be worth it, " speak to your lender or a mortgage advisor."
From the experts mouth, to you, our readers, there you have it. We can rest easier tonight knowing any impending threat to the roof over our head is less significant than we may have feared. Still, to forget about interest, and its tendency to rise, would be to discount everything we have talked about here. So think about Adams advice, and buy back as much as you can, while you can. After all, it seems more of a worthwhile investment than any savings account right now.About the Author:
James writes for Just Remortgages the leading website in the UK dedicated to providing the latest remortgage rates, and best remortgage deals in the market.
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