Cathedral Lettings
Mortgage Options in a Recession
Introduction
The housing market in the U.K. was the first area to be affected by the so-called "credit crunch", and housing prices have fallen sharply since their peak in the latter part of 2007. Essentially, banks and other financial institutions became increasingly unwilling to lend money for the purposes of buying property, causing the housing market to stagnate, and house prices started to fall. They continued to fall, to the extent that, by April, 2009, the cost of the typical British home had fallen to just over £150,000, 15% less than a year before. There are signs, recently, that the decline in housing prices may be bottoming out, but any recovery in the market is likely to be only gradual, as unemployment and the availability of mortgages remain causes for concern.
Mortgage Options
If you find that you are having difficulty in meeting your mortgage commitments in times of recession, the easiest way of reducing your monthly repayments is to switch to a mortgage deal with a lower interest rate. This is appropriate if you are coming to the end of, say, a fixed rate mortgage deal, or if it makes economic sense to pay any early redemption penalty associated with your existing mortgage deal, for the sake of a lower interest rate. The Bank of England has made cumulative cuts to the Bank Rate, from 5% in October, 2008, to 0.5% in March, 2009, and maintained that historic low rate thereafter, so there are some competitive deals available. That said, some lenders are actually increasing the interest rate of fixed-rate mortgage deals, despite the Bank Rate remaining at 0.5%, so make sure that you seek quotes from a number of different lenders.
Switching to an interest-only mortgage deal - where you no longer repay the original capital debt, but only the interest - for period of one, or two, years may provide a solution to short-term financial difficulty, as may increasing the term of your mortgage loan. Increasing the term will mean that you repay more, in the long-term, but will reduce your monthly repayments in the short-term.
In uncertain times, economically, taking out insurance cover for mortgage repayments is usually a good idea. For a monthly fee, cover can be provided against unemployment, accident, illness or any other unforeseen circumstances that would render you incapable of meeting your monthly mortgage commitment.
The housing market is, of course, subject to regional fluctuations, and homes in prime locations, such as on the coast, or in commuter belts, do tend to fare better than others. Durham properties, for example, remain very popular with buyers, and elsewhere in the northeast of England, Newcastle properties are also in demand.
Introduction
The housing market in the U.K. was the first area to be affected by the so-called "credit crunch", and housing prices have fallen sharply since their peak in the latter part of 2007. Essentially, banks and other financial institutions became increasingly unwilling to lend money for the purposes of buying property, causing the housing market to stagnate, and house prices started to fall. They continued to fall, to the extent that, by April, 2009, the cost of the typical British home had fallen to just over £150,000, 15% less than a year before. There are signs, recently, that the decline in housing prices may be bottoming out, but any recovery in the market is likely to be only gradual, as unemployment and the availability of mortgages remain causes for concern.
Mortgage Options
If you find that you are having difficulty in meeting your mortgage commitments in times of recession, the easiest way of reducing your monthly repayments is to switch to a mortgage deal with a lower interest rate. This is appropriate if you are coming to the end of, say, a fixed rate mortgage deal, or if it makes economic sense to pay any early redemption penalty associated with your existing mortgage deal, for the sake of a lower interest rate. The Bank of England has made cumulative cuts to the Bank Rate, from 5% in October, 2008, to 0.5% in March, 2009, and maintained that historic low rate thereafter, so there are some competitive deals available. That said, some lenders are actually increasing the interest rate of fixed-rate mortgage deals, despite the Bank Rate remaining at 0.5%, so make sure that you seek quotes from a number of different lenders.
Switching to an interest-only mortgage deal - where you no longer repay the original capital debt, but only the interest - for period of one, or two, years may provide a solution to short-term financial difficulty, as may increasing the term of your mortgage loan. Increasing the term will mean that you repay more, in the long-term, but will reduce your monthly repayments in the short-term.
In uncertain times, economically, taking out insurance cover for mortgage repayments is usually a good idea. For a monthly fee, cover can be provided against unemployment, accident, illness or any other unforeseen circumstances that would render you incapable of meeting your monthly mortgage commitment.
The housing market is, of course, subject to regional fluctuations, and homes in prime locations, such as on the coast, or in commuter belts, do tend to fare better than others. Durham properties, for example, remain very popular with buyers, and elsewhere in the northeast of England, Newcastle properties are also in demand.
