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[H715]House Prices In My

by Michael Challiner, Mic

Property booms are a real shot in the arm for those already nearing the top of the housing ladder. They've seen their property prices rise higher than they'd have dared to hope. The cost of borrowing has been low and house values wonderfully high. Life is not so good for first time buyers, desperate to make a start on their home-owning career, or for those needing to trade up to a larger home.

It depends on what you read, or who you believe, as to which way you think the property market may go in the future. Looking at housing history of the past few years may make people desperate to get in on the act and youngsters may think it's now or never. They may well be right …….. or not!

One of the main spurs to the superb growth in the property market is the benevolence of the building societies. By relaxing their lending rules and encouraging people to “go for it” they have fuelled the rises. Historically, a buyer was limited to a mortgage of three and half times their income, or in the case of a couple, two and a half times their joint income. Now we have a new fast-track mortgage where as long as you can put down a 25% deposit, and are not a first time buyer, you can have a fast decision without providing actual proof of earnings.

This is similar to the self-certification mortgages, which are designed for the self-employed, but this time it's on a mainstream mortgage basis. The company offering this innovative product is Alliance and Leicester. They say that they still credit score their customers and limit the loan to 75% of the value of the property and that by fast-tracking the mortgage, customers get the benefit of a very early decision, enabling them to clinch the deal.

With estate agents reporting rapid offers on properties, often by more than one prospective buyer, which may go on to sealed bids, the ability to have an almost immediate decision on their mortgage gives buyers the best possible chance of closing a successful deal. Buyers are racing to exchange contracts and seal the transaction. Demand is reported to be so great in some areas that gazumping is reappearing, something common in the 80's property bubble.

Conversely there are those who fear that this bubble may level out, rather than burst, and expect a slowing of the house price growth. Some economists have been giving this warning with monotonous regularity and have been surprised by the continuing strength of the market.

Another aspect of the property market is the buy-to-let sector. Banks and building societies are relaxing their rules regarding rental income cover. Where they used to reckon you needed a monthly 125% or more of the mortgage interest to cover unexpected expenditure or periods where the property stands empty, they will now accept 100%. All well and good when things go right, but it only takes an interest rate rise or two to throw all the figures out and the 25% “buffer” was a useful tool.

You can only use your own judgement, but we feel that some degree of caution may be sensible. When applying for a mortgage, be totally honest with your answers regarding your income and outgoings. Don't take on more than you can handle and try to build in some margin of safety.

For help and advice, an internet mortgage broker will be aware of all the best and latest deals. It's a fast changing market, but they'll trawl through the maze of mortgages and come up with some great deals, tailored to suit your individual needs.

It is becoming more and more apparent that the significant drop in house prices, initially only seen as a problem for sub-prime borrowers, is becoming as much a problem for prime-borrowers too. This affluent segment of consumers have already started to feel the pinch but the crisis is set to deepen even further. Borrowers that were privy to extended fixed rate periods will gradually begin to reach the end of this lower rate period and will then be subjected to higher rates as well as lower house prices.

Losing Equity

Virtually the entire market has seen a significant drop in house prices. This includes those that initially put down a large amount of money against their property. With house prices looking set to drop as much as 25% lower than their boom prices in 2005, this means that all but the long term homeowners will see the equity that they have amassed in their homes quickly dwindle.

Mortgage Reset Periods

The mortgage reset period is when the fixed rate term ends and the consumer is moved onto a variable rate. A consumer's mortgage essentially resets from a fixed rate to a variable rate. Due to the rise in rates, this means resetting onto what is typically a much higher rate of interest and similarly higher mortgage repayments.

More To Come

The market has already witnessed the reset period for the sub-prime market and the consequences were, and still are, catastrophic. Prime market borrowers were offered longer fixed rate periods usually amounting to five years. This means that the reset period for these mortgages has yet to come. In another 18 months, the more affluent market of prime-loan borrowers will be hit by this same rise in rates and this will be coupled with house prices that are expected to have dropped even further by that same time.

Why Debt Settlement Will Prove Even More Popular With Lenders

Because lenders will recognize that they are unlikely to recover the majority of their debts even through legal action, they will look for more viable alternatives. Debt settlement is, for the lender and the debtor, one of the most beneficial of these alternatives. Lenders know that they face losing a large proportion of their money through legal action and even if they do recover much of their money it can take many years to do so. In contrast, debt settlement at least offers them a good portion of this money and in a shorter period of time.

The Rise Of The Debt Settlement Program

As such, debt settlement looks to be the best all round option available. Because lenders see it as their most likely method of recovering money, and it enables debtors to avoid legal action or bankruptcy, we predict that debt settlement will become an even more popular option in the coming months and years. Put simply, it offers the best option for all parties involved. Falling housing prices and rising mortgage payments have forced many consumers to turn to alternative forms of credit.

Article Source : Pg. 9

About Author

Both Michael Challiner & Chris Markt are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

Michael Challiner has sinced written about articles on various topics from Finances, Advertising Guide and Quit Smoking. Get great deals from www.car-insurance-facts.co.uk on cheap car insurance and. Michael Challiner's top article generates over 165000 views. Bookmark Michael Challiner to your Favourites.

Chris Markt has sinced written about articles on various topics from Finances. Chris Markt is one of the founders of DebtSettlementOne.com which is a professional debt settlement company offering. Chris Markt's top article generates over 27100 views. Bookmark Chris Markt to your Favourites.