Saturday, 14 April 2012

Increase in Mortgage, houses becomes 'less affordable'

Within the first three months of 2012 almost all big banks of UK including Halifax, RBS, Clydesdale and Yorkshire Bank etc. have raised their mortgage rates. Which obviously decreases the average buyer's ability to buy a house?

The mortgage lenders have given quite a tactful reason for this increase; they say that since there is an increase in the Libor rate (the average interest rate that the biggest London banks charge when lending to each other) has risen because of the crisis in the Eurozone.

Which makes it more expensive for the mortgage lenders to borrow money from each-other; as a result of this they inflict this damage on the customers by raising their SVR (A rate of interest set by a lender on a mortgage).

There however is a double standard followed by the lenders because it is found that 95% of lenders had failed to fully pass on cuts in the base interest rate to their SVR mortgage customers.

Whomsoever we blame the prospective property buyer and sellers are the ones who suffer because of this. In a broader sense about 2,000,000 house owners will be affected by this increase in the price, and more than 3,000,000 to 5,000,000 prospective buyers will also be affected as they won't be able to cope up with the rising mortgage rates.  Many people will lose their houses and the rate of repossession will increase, while at the same time new potential buyers will have to arrange for backup money while planning to buy a house. In an economy where struggling families are already strained in making to-ends meet because of the recent rise in the petrol price; how is it possible to pay an extra £ 300 per year for a £ 100,000 mortgage?

A creative solution to this misfortune is that present homeowners rent a part of their property so that they can generate the newly imposed taxes, a benefit for the eventual buyer turned tenant is that he will get time to plan and save money so that he can afford a proper house without the risk of being thrown out!

Towards the end we can conclude that even though the mortgage rates are rising and most house owners and new buyers are disappointed about it but that is not in our hands but renting an apartment to help you pay for the 'Extra' mortgage is surely in our hands.

Effects of Eurozone crisis on UK’s Housing Industry

"The crisis in the euro zone is having a chilling effect, not just on euro-zone economies, not just on market confidence, but on the British economy too" don't these words sound familiar?  They why spoken by PM David Cameron while addressing the European Union summit in Brussels. It is no hidden fact that the euro-zone crises are having deep and long-term consequences on UK's economy especially the real estate market.

It has not been long since the previous European Meltdown of 2008 and all of us are well aware what happened to the real estate market of UK back then, but this time things may become even worse.

The result of a constant Euro zone crunch is double for the UK. Primarily, if countries like Greece and Italy go 'broke' then is to be expected that they cause extra credit crisis. This might have an effect on the lending capabilities of many banks and as it occurred in 2007/8 when numerous mortgages were taken back and outrageous standards such as needing a 45 to 50% deposit to buy a home or have as equity to access the mortgage deals. Hence an ongoing crisis in the Eurozone is to be expected to make it harder to secure mortgage lending, especially for first time buyers who have a very smaller deposit.
What will then happen is that most buyers would either settle down for a cheaper and smaller property or rent a big property of their choice and save money or wait for the market to go sensible and then buy their 'Dream House'.
What are mentioned above are the headaches of a buyer but even a seller has to suffer in such a crisis. For a seller there would be less people who could afford his house due to lack of available mortgages and that might lead to further fall the in prices.
Some sellers might not even want to sell their property for rates those low; many might not be able to afford selling at such a low price, eventually most of the potential sellers will become landlords and most of the potential buyers will become the tenants.
However bad it sounds that fact is that, the effect of the Euro zone Crisis are wide-spread and as far as England (or London) is concerned they are devastating. We cannot do much to stop them, but we certainly can prepare ourselves for the worst and not be a part of the "Collateral Damage".

Buying a house in UK costs a fortune

"House Prices Double in 4 Years". "UK property prices are constantly on a rise." "Property prices still creep up by 1%". Most of you would have read these lines, what we constantly keep thinking is that why is there a ceaseless boom in the real estate market of UK, including and especially London?

The answer is quite simple the location of UK and London in particular is very strategic. Due to its location UK can trade with the Asian countries in the morning and with US in the evening, which makes it a buzzing hub for all sorts of commercial activities. Many people even call London the Commercial Capital of the World.
The point to be noted is that due to its ever-vibrant trade and commerce a lot of people come to UK every year and where on one hand the population is increasing almost uncontrollably the available housing facilities are quite less when compared with this vast population. So due to this reason the prices of houses are almost constantly increasing in London.
In such a scenario buying a house might cost you a fortune! Moreover, most people forget to consider a lot of other costs that are associated with buying a house, they just think of the mortgage and the down-payment but there are much more costs that are associated with buying a house, to List down a few:

Insurance, prior to getting a mortgage most lenders will ask you for a proof of insurance. The insurance rates vary from property to property however for an average sized property in a regular area would cost you about £ 1000 annually.

Property taxes/Stamp Duties are the second outflows that are out of your control. Obviously bigger properties make you pay more taxes than the smaller ones but the average vary from 0% to 5% according to the price of the house

Utilities are also an important factor that most people tend to forget while calculating the cost of buying a house; it costs about £ 2,000 to £ 4,000 annual to heat up your house to pay the council fees and so on.

Appliances even though most houses come with major appliances you might have to buy some new ones too!

Legal Fees, Mortgage Lender's fees, Survey Fees, Agent's Commission, Fixtures and Fittings and there might be a few other which will be left out no matter how perfectly you try to incorporate every cost in your calculations.

So, buying a house in UK indeed costs a lot!