Families Housing Together to Save Money
Instead of struggling to get their foot on the property ladder, an increasing number of extended families are living under the same roof in order for them to save money and control their debt management worries.
Research by the Halifax Home Insurance found that, out of those who live with their immediate family, a quarter would consider buying a larger home so there would be room to house additional relatives. A similar number (27%) would be prepared to co-own a property with their parents or in-laws.
However it could be less matter of choice, and more a fact of rising personal debt levels and higher living costs, as 31% said that they would do this for financial reasons.
Spokesperson for the study, David Rochester, said: “The current economic and social climate in Britain is showing a shift towards several generations living together under one roof.”
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Increase Your House Value with an Extension
With the economic turn down hitting our house prices hard, more of us may be thinking about ways to increase the value of our home and avoid negative equity.
According to new research by the National Association of Estate Agents (NAEA), the best way to increase the value of your home is to add an extension. Although this may be an expensive move, 92% of estate agents believe that it could potentially improve a home’s asking price.
NAEA chief executive, Peter Bolton King, advised that home owners should be aware of the true value of their property and understand that it is ultimately governed by the average house price in the area. “It is worth researching the local area first and familiarising yourself with what types of properties sell best.”
Home improvements which were less likely to increase house value include loft conversion, off-road parking place and a new kitchen.
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First-Time Buyers must make Sacrifices
Getting a mortgage if you are a first-time buyer (FTB) is harder than ever, as the credit crunch means that mortgage lenders are asking for much higher deposits. If you are an FTB then it is important that you save as much of a deposit as possible, to increase the chance that you get accepted for a loan at a good rate of interest.
Michael O’Flynn from website FindaProperty has claimed that FTBs must make sacrifices if they wish to own a home in the current economic climate, saying that they should aim for a deposit of at least £16,500.
Flynn suggests that “treats such as eating out and holidays abroad may be worth missing out on for a year or two, as long as they keep their mind on the end goal of owning a home.”
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Negative Equity Fears for Millions
Almost 1.2 million UK homeowners could be facing negative equity if house prices continue to fall at the rate they are currently doing.
UK mortgage borrowers are facing the risk of negative equity and higher mortgage payments. The Bank of England’s Financial Stability Report (FSR) reports one in 10 homeowners could be left with their mortgage debt being more than the value of the home, due to the decrease in house prices.
About 3% of homeowners are currently in negative equity. But if house prices drop by another 15% from their record high in October 2007, this figure could sharply increase. Those who are most at risk of negative equity are first-time buyers who have recently purchased their first home.
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Home Improvement Loan Applications Increase
In light of the changes to the housing market, homeowners are more likely to stay in their home to make renovations than purchase a new home. According to a survey by Lloyds TSB, there has been a 19% increase in the number of loan applications for house renovation compared with the previous year.
The research also revealed that 59% of homeowners who were considering selling their home have put these plans on hold. Half of these now plan on carrying out additional home improvements in order to avoid debt management problems and increase the value of their property. The top improvements which new buyers have shown the most interest in are new kitchen or bathroom.
David Wishart, director of personal loans at Lloyds TSB, commented: “In recent months we have seen a significant increase in home improvement personal loan requests. For the last decade homeowners have been able to sit back and rely on rising property prices to increase the equity in their home but sadly this is no longer possible.”
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Home Owning is an “Impossible Dream”
Low income couples will find it “almost impossible” to afford to buy their own home, due to a mixture of high house prices and large deposits which are being requested by lenders.
The Royal Institution of Chartered Surveyors (RICS) have reported that a couple with a low income (£27,516 after tax) would have to save more than a 100% of their annual income (£27,738) in order to save up for a deposit. This figure is well up on the 21% of pay needed in 1996. It is now almost as difficult to get on the housing ladder as it was at the worst ever level, the third quarter of 2004.
House prices have increased an average of 10% a year since 1996, whereas the lowest incomes have increased by just 3.5%. But affordability has improved for those who are already on the housing ladder, and the credit crunch
David Stubbs, senior economist at RICS, comments: “With mortgage approvals declining, the picture does not look like improving in the latter part of 2008 and first-time buyers will find their path to home ownership increasingly blocked.”
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26% Increase in Monthly Outgoings
The credit crunch is hitting hard with the average Brit struggling to cope, as their monthly outgoings soar by an average of 26% during the past two years alone. According to research carried out by insurer Combined Insurance, this hike is being proportioned to higher housing and energy costs.
The average person is now spending £1,281 a month on bills and general costs of living, which has shot up from £945 in June 2006. This research shows that, on average, people are spending around a third more on rent and mortgages than they were two years ago. Everyday bills such as television subscriptions, electricity bills and water rates have rose by an average of 30%.
Those with children have been hit the hardest, as families have found a 77% increase in the average child care costs and other spending, such as clothing, has increased by 37%.
Director of Combined Insurance, Nigel Brittle, said: “The many cost of living hikes are taking their toll on the monthly budget and many Britons are living on the edge with their finances.”
Because of this increase, it is inevitable that households are going to have to cut back on their spending in some areas. This research reports that people are spending 8% less on insurance and 7% less on telephone and broadband costs.
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Negative Equity Crisis
More than 23,000 people who took out 100% mortgages at the peak of the property boom could be facing a negative equity crises. New research from the Council of Mortgage Lenders (CML) says that for these homeowners, falling house prices mean that their mortgage on their home could be more than their home is worth
The figures released from the CML are only lightened by the fact that these type of mortgages only represent a very small section of the mortgage market, as they reflect just 2.5% of the total lent.
Negative equity means that the loan against the home is more than the property is worth. This only really becomes a problem when the owner wishes to move house or can no longer afford to repay their mortgage. New research shows that very few homeowners are planning to move home with the fewest transactions per estate agent since records began in 1978.
CML spokesperson, Sue Anderson adds that: “The housing market isn’t a homogenous whole - prices behave differently in different areas. And most people who bought in the past year probably won’t be looking to move yet anyway.”
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House Prices Not Low Enough for 1st Time Buyers
House prices may be falling throughout the UK but this is not enough for first time buyers. New research shows that more than one in four of those looking to get onto the property ladder are out priced in their local housing market.
Hometrack, the property information group, report that almost 30% cannot afford even the cheapest property prices in their area. In places this figure reached 41% in London to more than 50% in other areas.
These affordability issues are being blamed on rising mortgage costs, the banks unwillingness to lend and strong house prices compared to the average pay packet. Mortgage costs for first time buyers rose by 12% in 2007, meaning that almost 35% of a monthly wage will go to the mortgage payment.
Richard Donnell, director of research at Hometrack said: “Until such time as mortgage rates start to fall then lower house prices will be the only real driver of improved affordability for first time buyers.”