Good News For Homeowners
The falling house price market is good news for some UK homeowners, according to a recent publication by Guardian Unlimited.
First-time buyers will be able to step onto the housing ladder without taking out mortgages with monthly payments in excess of 40% of their income. The falling interest rates and starter homes around £147 000, make homes more affordable than they have been in recent years.
Long-term homeowners will benefit, if they purchased their home more than five or so years ago. Their home values will not drop below the purchase price, leaving them in a negative equity situation. Most of this group will continue to live in their homes, without feeling the housing bubble, or the burst.
People who expect to move will find the lower prices a help rather than hindrance. A crash will make it easier to trade up. Many of these people purchased their first homes when the average price hovered around £100,000. Those homes are now "worth" £200,000 and even £300,000.
Homeowner's capital gains will be dwarfed by the increased mortgage they will take on, but this is far lower than what they would have experienced if they had moved last year.
The Buy-to-let market will find the onslaught of renters they have waited three years for as more first-time buyers are forced to save larger down payments, and face tighter lending criteria. This has already lead to a reduction in the flood of 'to let' signs that bordered UK streets a year ago.
Mortgage holders whose terms will be due for renewal will see a 1% increase, but this is far less than they were expecting last year. Other casualties will be people who over-extended themselves to purchase in the height of the bubble, and those with poor credit ratings.
Published on January 24, 2008
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