What’s going on with house prices and mortgages?
There is no doubt that both the housing and the mortgage market have been going through a very turbulent time over the past year. House prices have been falling month on month, and mortgage availability has become increasingly tight. However, amidst all of the chaos that has been going on in these sectors many people may have become confused over what is actually going on in these markets.
When news of the house price falls first started to circulate, many people that were looking to get onto the property ladder or were looking to move to a larger, more expensive house became excited, as they thought that they would save money - but is this actually the case. In theory those that are looking to get onto the property ladder can save money because of falling house prices. Also those moving from a less expensive house will lose money when they sell, but if they are moving to a more expensive house they will save more money than they lost on their cheaper property.
However, one industry official said that this is not always true as larger properties may hold their value better.
He said: ‘Certain properties at the very high end of the market, or homes that very rarely come up for sale, may hold their value irrespective of market conditions. If you’re selling a three bedroom house in a very popular area and buying a five bedroom house in a less popular area, or an area where prices are falling faster, then you could do very well in the medium to long term.’
He added: ‘OK, you may have to take a 10% hit on your asking price but if the five-bed you make an offer on has fallen in value by 15%, you could be getting a bargain. If, on the other hand, the three-bed home you are selling is in an area that has been hit particularly hard, you may find that the five-bed home you want to buy in an area that has been less affected hasn’t come down as much proportionately. By and large house price falls do tend to favour people moving up the ladder.’
There is also confusion about the availability of mortgages, with many under the impression that they are now impossible to get. Certainly, mortgages have become more difficult to get, and there are now few lenders that offer affordable mortgages for those with only a 5% deposit. However, there are still deals on offer for those with decent credit and a fairly good deposit.
One official said: ‘If you’ve got a good credit history, a good job and a deposit of 10% or more then, despite all the scaremongering out there at the moment, getting a mortgage won’t be a problem at all. The reality is that lenders have tightened up their criteria considerably and are only lending to people, or certainly offering good rates to people, they deem to be low risk. What we’re seeing now is a return to how the mortgage market was 10-15 years ago. Mortgages aren’t hard to get, they’re harder to get. And this is no bad thing.’