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Tue 5th Aug, 2008
Posted in Consumer Credit, Homeowner Loans, UK Finance, mortgages, Remortgaging, Homeowners, House buying, Property, Financial news, Borrowing, Equity release, Secured loans, Negative equity at 12:59 pm by admin
It’s been a turbulent year so far on the housing market, with Nationwide reporting prices showing their biggest annual fall since 1991, the year of Nationwide’s first survey.
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.
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Fri 18th Jan, 2008
Posted in Consumer Credit, Homeowner Loans, UK Finance, interest rates, mortgages, Remortgaging, Inflation, Homeowners, House buying, First time buyers, Property, Financial news, Housing news, Borrowing, Secured loans, Negative equity at 1:47 pm by admin
This is probably a burning question for most of us out there since our house is not only a roof over our head but also the largest investment we will probably ever make.
Up until 8 months ago it appeared as if the house price boom would never end with over a decade of record breaking growth in house prices.
However more recent figures coming out in the past two months paint a gloomier picture. If you are a mortgage holder then this could be a cause of great concern as you may end up owing more on your home loan than the value of your house: i.e., negative equity.
Meanwhile the US has seen a decade of growth starting to turn and house prices in many areas of the US are falling as the global credit crunch takes its first victims. Right now in the US there is a record number of mortgage defaults and this is going to start having an effect on us here in the UK as the cost of borrowing goes up.
The Royal Institution of Chartered Surveyors (Rics) has said that nearly half of its surveyors saw price falls in December, the worst figures since late 1992.
Interest rate rises and a tightening of lending criteria are thought to be the main causes of the market drop, with lenders reporting a drop in loan approvals.
The Halifax and Nationwide also reported seeing a weakening of the property market, and recent Government data from
“The housing market is clearly feeling the pinch from the credit crunch and the round of interest rate hikes in 2007,” said Rics spokesman Ian Perry.
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Thu 8th Nov, 2007
Posted in Consumer Credit, Personal loans, Banking, UK Finance, Credit Card, Financial news, Borrowing, Personal debt, Secured loans, Negative equity, Debt management at 1:55 pm by admin
According to the latest research from Abbey most of us here in the UK don’t know much about our own personal finances.
In a survey of more than 1000 British adults a 10 question personal finance exam was set with a grading system similar to that of the GCSE standard. Questions on the survey ranged from credit card interest, secured loan repayments and negative equity.
One in ten Britons had deficient knowledge of their own personal finances scoring below a C grade. 25 percent achieved an A*, 30 percent scored A and 21 percent scored a B. The remaining 24 percent who scored below a B grade are in danger of making bad financial decisions due to their lack of information.
A bank spokesman claimed that the questions chosen were ones that Abbey felt everyone who has a current account should be able to answer. The hardest questions on the survey are related to pay back time of credit card balances before fees could be charged, which is 6 weeks in case you are wondering. Almost half of those surveyed did not know what negative equity meant and possibly the most worrying of all was that 23 percent of us are unaware that non-repayment of a secured loan could possibly lead to losing the house the loan is secured against.
So before you go and get yourself a loan make sure you understand all the terms and conditions. Otherwise you could be in for quite a shock.
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Thu 13th Sep, 2007
Posted in Consumer Credit, Homeowner Loans, UK Finance, interest rates, mortgages, Consumer debt, Homeowners, House buying, Financial products, First time buyers, Property, Financial news, Housing news, Borrowing, Personal debt, Secured loans, Negative equity, Debt management at 12:46 pm by admin
According to a report from Fitch Ratings, Britain’s economy has been rated as one of the most vulnerable to a property crash. The report went on to state that the property in the UK is 20% overvalued, coming in second behind France.
Other countries that were reportedly the most exposed to economic problems were not only the UK but Denmark and New Zealand as well, especially if the property prices weakened and interest rates increased. The report from Fitch also reported that house prices have been far more than the income received by Britons over the past ten years, with the average house now costing £196,500 and the average gross salary at £23,250.
All this is bad news for those overstretched by home loans who could end up in negative equity if or when prices fall.
The report from Fitch assessed a number of indicators of household vulnerabilities as well as house price valuation measures, which has indicated a record level of household debt. The high household debt is considered to have come from the rising interest rates as well as the many years of strong house price inflations, not only in the UK but in other countries as well. New Zealand was rated the top economy that was most vulnerable with Denmark ranked second and UK as the third most exposed. The reason as to why Britain fell into third was due to the high household net worth and the lower debt servicing costs that helped household finances to be less at risk should prices tumble. The report from Fitch went on to report that in some economies there was evidence of oversupply with more properties being built than household created with the UK’s new households outstripping the supply of property.
The news for borrowers then is to beware of taking out 100% or more home loans, especially on an interest-only basis, with a view to making money when the property sells. With the current housing situation, households could end up in a negative equity situation. This is not a problem for those looking to sit tight until prices rise again, but is bad news for those tempted to overstretch their credit on cards and cheap loans.
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Wed 16th May, 2007
Posted in Bad Credit, Consumer Credit, Homeowner Loans, UK Finance, interest rates, mortgages, Remortgaging, Consumer debt, Homeowners, Spending, Property, Balance transfer, Financial news, Housing news, Borrowing, Personal debt, Negative equity, Debt management at 10:01 am by admin
The credit rating agency Standard & Poor’s report signs of stress in the British sub-prime industry, which lends mortgages to borrowers with bad credit histories, especially those who have been turned down by traditional lenders.
The warning follows on the heels of the sub-prime crisis in the US that hit after the sub-prime market collapsed under the pressure of falling house prices, leaving borrowers with billions of dollars of bad loans.
The warning came one day before the Bank of England will make its most recent decision on interest rates. A quarter-point increase in the cost of borrowing to 5.5 per cent is expected some time this spring.
Bank of England Governor Mervyn King warned about a housing market slow down when the interest rates increase. But he does not expect it to crash despite pessimistic predictions.
Economists are divided over the Bank’s monetary policy committee choice to increase rates tomorrow or wait until May.
S&P admits that the problem in the UK sub-prime mortgage market is not as bad as in the US, and may never drop that low. Whilst bad credit loans are prevalent in the UK, they are not such a boom industry as in the States.
‘Nevertheless, overall arrears and repossession rates in the UK nonconforming sector are on the increase,’ it said. ‘Looking forward, we expect a continued slow deterioration in arrears in the short term, as recent rate rises work their way through.’
Analysts have already warned householders to see if they can affordably re-arrange their homeowner loans to more affordable options, or to apply for fixed rate financial products before it is too late.
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Mon 8th Jan, 2007
Posted in Consumer Credit, UK Finance, Buy to let, Property, Financial news, Housing news, Borrowing, Personal debt, Negative equity, Rental property at 11:13 am by admin
The Association of Residential Letting Agents (ARLA), claim that a new breed of land lord was born around ten years ago when the housing laws were changed to eliminate the fear of a sitting tenancy.
Legislation established between 1960 and 1980 gave sitting tenants enough protection that landlords were not able to evict them.
The 1988 Housing Act assured shorthold tenancies, was tweaked in 1996, and gave birth to The Private Landlord.
“Until then lenders had been scared to lend on residential property because of the sitting tenant problem,” says ARLA spokesman Malcolm Harrison.
The typical buy-to-let landlord is a mature person investing for retirement, and to offset the damage done by private pension scandals. And, they are borrowing homeowner loans as the foundation for their financial security.
Mr Harrison claims the outlook is positive.
“Demand for private rented housing is likely to remain strong.”
“First time buyers are older then they’ve been for some time. People have a much more flexible attitude to moving for work,” he adds.
“There is a soaring divorce rate. There is a greater instance of people living alone. And it’s becoming socially acceptable again to rent.”
Few have been landlords for more than a few years. They lack experience and the finances to carry their properties through recessions or other economic disasters.
Lenders demand larger deposits from buy-to-let borrowers, so there is a cushion for the bank incase of a drop in housing prices that will leave the land owner in a negative equity situation, with their loans worth more than their home’s value.
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