Fool.co.uk: House price standstill could ‘imprison’ first-time buyers
October 8, 2007 by admin
Filed under News, News-Mortgages
Many first-time buyers may fail to sell their home at a price high enough to cover their mortgages if house prices begin to fall.
Fool.co.uk states that people who have recently bought homes on 100 per cent mortgages could suffer from the evening out of house prices and that they have cause to be “concerned”.
Although 100 per cent mortgages are not a significant part of the market, the Council of Mortgage Lenders estimates that they are taken out by one in every 20 first-time buyers.
The website warned that these homeowners would suffer from even a small downturn in prices, leading them into negative equity.
However, David Kuo, head of finances at Fool.co.uk, advised: “They can tip the scale in their favour by ensuring that they choose repayment mortgages rather than the cheaper interest-only options. They should also overpay their mortgage as often as they can afford.”
Mr Kuo added that doing this would help them to chip away at their debt and give them more equity in their homes allowing them an improved choice of mortgage provider.
In the UK, house prices have seen a slowdown in recent weeks with borrowing costs still high and the Bank of England’s decision to hold interest rates at 5.75 per cent meaning the pressure on people repaying mortgages remains high
