Mortgages - What Goes Up Must Come Down

House prices have increased to almost quadruple in the last 20 years. In 1987 the average house price was less than 50,000. In 2007 it was over 200,000. That\'s a scary realisation for any buyer, but for a couple looking to buy their first home it may be just too daunting a prospect to face.

The number of people living in their own home fell by around 83,000 in 2007, due mostly to the inflated house prices Britain has experienced during the last decade. Because there hasn\'t been an equal rise in salaries, homeowners have been forced to admit they can no longer afford their home which they may have bought at a very reasonable and manageable sum 20 years ago.

Property rentals have soared as couples are finding they could pay less per month to a landlord than to a mortgage lender. The added advantage of renting a home is that your landlord, not you, is liable for any major repairs. But while renting properties has its plus sides, there\'s also the inevitable minus side to consider.

Tenants have less standing in the eyes of money lenders and insurance companies; car insurance alone is usually cheaper for homeowners. Getting a loan is easier if you have a mortgage, as you can use your home as equity on a secured loan. And of course, at the end of the mortgage term you\'ll have your own home to show for your years of paying; with a rental you\'ll have nothing.

This is of course, if your home doesn\'t go into negative equity; the resale value of your home dropping to less than your mortgage amount. With the 125% mortgage favoured by first-time buyers, homeowners were beginning their journey in immediate negative equity. Fortunately, this type of mortgage is steadily being scrapped, along with the 100% mortgage also popular with first-time buyers. Nationwide has announced their plans to limit buyers wanting lower interest rates to an 85% mortgage - meaning buyers will have to pay 25% of the property\'s value upfront. While paying a larger deposit will ensure lower repayment and interest rates, it does mean that couples will have to save larger sums of money before applying for a mortgage.

But what goes up must come down. The property sector is slowly becoming a buyers market with prices beginning to fall for the first time in decades. While bad news for those wishing to sell their home, it\'s good news for anyone wishing to start climbing the property ladder. Although prices are still higher than they have been since the 80\'s, mortgage experts forecast a significant drop in 2008-9 which will make homes more affordable for those who don\'t wish to rent. If you\'ve been thinking about buying your first home, now\'s the time to start saving your deposit and comparing mortgages.

Mortgages should be considered carefully before taking on. There are different types of mortgages, all with different benefits. Compare mortgages online.

J Tillotson is a financial author in the UK

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This entry was posted on Friday, August 15th, 2008 at 6:16 pm and is filed under Mortgage Rate Refinance . You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.