The average home has now dropped by £17,000 in the last year, according to Nationwide – bad news for anyone hoping to sell and re-buy using equity in their home: The equity may just not be there any more.

Homeowners who took out interest-only or 90% or greater home loan deals are particularly at risk of losing everything if they fall behind on loan repayments. Those who need to sell up and were banking on rising prices to give them equity for a new home are having to stay put or face negative equity.

Fionnuala Earley, Nationwide ‘s chief economist said: “The weakening economy and poor housing market sentiment do not suggest that the market will recover quickly.”

However, the National Housing Federation has said that it expects house prices to rise by 25% by 2013, due to the lack of new houses being built. Demand is expected to outstrip supply in a few years, pushing prices back up.

In the meantime, economists are predicting that the Bank of England will be forced to cut the base rate as a means of curbing inflation, as fuel and food prices continue to rise.

Figures show that over a traditional 25-year period of a mortgage, buying a property costs an average of £437,925. This figure is only slightly ahead of the average for renting a property for 25 years which cost an average of £443,736.

While in past years buyers could have expected to save somewhere in the region of £24,000 over 25 years, the impact of rising interest rates and rising house prices means now that the difference between buying and renting has fallen to just £5,811.

In some areas of the UK it is actually now cheaper to rent a property than it is to buy one.

Northern Ireland is a particularly bad area for buying when compared to renting. Property prices have gone up by 40% in the past year meaning that the average house buyer will now pay £572,814 for their property over 25 years while renters will only pay £392,097 for renting the property over the same period. This means by renting a property you will save a massive £180,717 over 25 years.

While the figures do include maintenance costs they do not include set-up costs for home loans. The figures also suggest that it would be cheaper to rent a property in Wales, the north-west of England, Greater London and Yorkshire.

Obviously these figures look at the matter solely from the view of payouts, and not from the security gained from home ownership. Additionally, equity grows as home loan repayments are made and as house prices rise, allowing homeowners to borrow secured loans against their property for both property improvement and equity release purposes.

Our environments play a vital role in our emotional wellbeing.  Most parents know this. The concept of borrowing a secured loan, or a mortgage, to redo a teen’s room, a den for entertaining, or the basement, makes common sense.  But, parents rarely see the importance of treating a dorm with the same respect and concern.

Students need a place to unwind and relax, but it must also be an individual statement that lets them continue to grow emotionally, amid the confliction and confusion of a dorm, or student housing.

Student housing décor goes far beyond picking a wall colour and a couch. Many parents are shocked to realise that student housing often lacks a respectable bathroom.  Adding a pure water dispenser, a new toilet seat, and fixing the window coverings can be expensive, but they are vital to a student’s well being.

A secured loan is the best way to do this. It frees enough money to do the job right, in the least amount of time.  And, it can be paid back quickly, without high fees and penalties, depending on whether the property was leased for one year or longer.

A property that is leased for more than one year offers the parents some leveraging. They may be allowed to upgrade the bathroom, add a heating unit, and improve elements which would be the landlord’s responsibility if the housing was a permanent residence.

A  £50,000 wedding does not cost £50,000. Instead, it costs the original capital and the accumulated interest. While £50,000 will not buy a dream wedding any more, it does take a major chunk out of a person’s savings or home equity.

The important consideration when making a big purchase is value.  Many people buy a £5,000 sofa instead of a £10,000 sofa. The first couch is worthless long before the loan is repaid.  The second piece of furniture may not only retain its value, but it may even increase in value depending on the market and the demand.

The next thing to consider is the interest.  Many people borrow on unsecured personal loans instead of secured loans.  Releasing equity from your home can be a good idea if it saves you money.

Many people believe that finance companies cannot force the sale of a home to repay a debt if the borrower defaults. This is no longer true. In fact, a company can ask a judge to force the sale of a home for a relatively small loan.  So, paying the extra interest for an unsecured loan, or a personal loan, is no longer ‘wise borrowing’.

The cost of borrowing has made it impossible to grab the first financial product offered.

This is a global concern. The Ford auto company recently discontinued their heavy luxury car because they could not feasibly convert it to run on low emission fuels.

The first step to an eco-friendly and healthier home is to replace the duct work and heating system with energy efficient and low emission equipment.  This could include replacing electric with solar water heaters, or water heaters that heat water as its needed, and updating the furnace to a new energy-efficient model.

Energy-efficient models should be used in tandem with timers that turn them on when needed, and turn them off to eliminate energy waste.

As homeowners pay more attention to lighting and ventilation in old homes, venting and windows are moved to create balance, instead of being placed at geometrically balanced segments of the wall.

Windows maximize natural light, and incorporate solar heating.  Good venting removes contaminants from a room, and reduces the need for air conditioners.

The initial investment is substantial, but the long term benefits are expansive. Many analysts suggest that now is the time to ‘go green’ before the demand spikes and the prices increase.  Others say that prices are likely to drop as products become more mainstream.

Even now, a consumer can expect to borrow a £20,000 to £50,000 mortgage or secured loan to completely upgrade their existing home.  An underground heating system, which takes heat from the earth could see a homeowner needing a £15,000 home improvement loan to implement. The cost may not be cheap, but big savings can be made on heating and electricity bills.

In the past, people worked to pay off their mortgage and escape debt. Today, people are releasing that equity, investing it in businesses, property, and stocks, and building wealth.

This wealth is then returned to the investment fund and used to continue building wealth. This is fairly secure, as long as the investor doesn’t become involved in any high-risk ‘get rich quick’ schemes.

Financial companies are becoming familiar with the concept of leveraging the money in your home to build wealth, instead of hoarding it.  A cautious person can release the equity in their home, and earn enough money in 10 -15 years to restore the money.

With a good investment strategy, the homeowner will have their home loan repaid before the end of the mortgage term, and give the homeowner thousands in profits.

Playing it safe can be dangerous. Many people will not hesitate to apply for a second mortgage, or a secured loan to help them escape an emergency. People will draw equity from their home when they are ill, lose their job, or have a family crisis.  However, they will not withdraw the money to build wealth.

Prevention is a better strategy than waiting until you are in trouble and then trying to dig yourself out of the hole.

As the household costs continue to rise, many consumers are adversely affected. The increase in mortgage payments that has been driven by the four interest rate rises since last August is having a big impact on consumers.  Over the past two years, strong consumer spending has been the power behind Britain’s economy, however figures now show that spending has decreased slightly.  Although consumers are taking out secured loans against the rising value of their homes, many retailers are concerned that the spending squeeze is likely to intensify as interest rates are expected to hit six percent by the end of the year.

As basic household bills are increasing, many households are being affected and are therefore cutting down on unnecessary expenses, such as clothing, shoes, or unnecessary electronic equipment.  It all depends on the family’s choice and importance of ‘luxury’ items.  Whatever the choice may be, there has been a slowed consumer spending growth throughout the country as many households are now stretched with their mortgage repayments and other household bills. Customers are now asking whether the purchases they once put on a credit card or personal loan without a thought are now really necessary.