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Expat Investor : October 2008
PROPERTY INVESTMENT The world of mortgages one year on MoneyFacts’ analyst, Michelle Slade, comments on the mortgage market one year on from the start of the global credit crunch. As house prices continue to fall and the risk of default increases, the lenders are pricing more for risk and as a result these standard factors are not quite as influential on the rates as they once were. There does not appear to be a single aspect of the mortgage market that has not been unfavourably hit. Over time the mortgage market should continue to improve from its current position. The number of products will steadily increase and rates will lower with increased competition between lenders. However, it will be a while before lenders regain a healthy appetite to lend with the maximum LTVs on offer largely determined by the future decline in property values. With all the above said it is highly unlikely that we will ever get back to the same levels that we were at a year ago. (Recently) ... numerous One year ago the financial world changed completely as the credit crunch took hold. Today the world of mortgages is a completely different place. The standard factors which Total number of products Average 2-year fixed Average 3-year fixed Average 2-year tracker 2-year fixed average fee 2-year tracker average fee Average max LTV Number of 100% plus mortgage lenders Number of 100% mortgage lenders usually determine the rates at which mortgage rates are set, including bank base rate, swap rates and Libor rates are all much lower than this time last year, yet the rates on offer are much higher. August 2007 13,027 6.56% 6.54% 6.39% £803 £1,024 90% 11 33 Number of lenders offering self-certification mortgages 44 Number of lenders offering interest only mortgages Number of lenders offering fee free mortgages Number of sub prime lenders Source: Moneyfacts.co.uk SVR is more important to UK borrowers now Nationwide Building Society’s latest research examines how economic events over the past year have affected mortgage holders’ attitudes to borrowing.. Borrowers spend more time shopping around The research shows that borrowers whose deals are coming to an end will spend more time shopping around and will be more interested in rates and fees than they were a year ago. ? Over half (53%) say they are more interested in the rate they come to at the end of their mortgage deal than they were this time last year. This may well be because a quarter (25%) of respondents expect to pay their lenders’ standard variable rate for longer than they would have done in the past. ? Over half (56%) say they are more likely to shop around for a new deal now than they were this time last year. ? 64% say that the cost of the fee is just as important as the rate on offer. Martyn Dyson, Head of Mortgages, tells Expat Investor, “It’s more important than ever for borrowers to shop around for the best mortgage deal overall and not just settle for the cheapest headline rate. Borrowers should consider the overall combination of headline rate, fee and the lenders’ SVR.” Fixed rate mortgages more popular than before The research also showed the growing importance of fixed rate products offering long term payment security. Nearly half of borrowers (44%) say they would be more likely to look for a fixed rate mortgage than they would have been last year. 43% say they are now more likely to consider a longer term fixed rate such as five years or more. Mr Dyson comments, “In the current climate, it’s not surprising that more people are looking to fix their mortgage rate for longer. As a building society we always aim to offer our members the best possible deals, which is why we recently announced further price cuts to our two, three and five year fixed rate deals by an average of 0.60% over the period.” Fast Facts 88462 Fairinvestment.co.uk has joined forces with MRI Overseas Property to launch a new overseas property search facility. The new property search site aims to offer an ‘excellent’ service from search right through to purchase and after sale assistance. Director James Caldwell says, “Whether you want an apartment in the heart of the city, a traditional villa or cottage, a chateau in premium wine country, or a ski chalet in the mountains, Fairinvestment.co.uk can help you find just what you're looking for.” MRI sells 20,000 properties each year, in 18 countries around the world, including the Cape Verde, Egypt, the Bahamas and of course Europe; with French and Spanish property still popular alongside newer favourites like Bulgaria and Romania.With offices all over the world, MRI believes buyers can get the advice and assistance they need at every stage of the process, including after-sales care. MRI will manage a property if the owner decides to rent it out, and help them to sell it on in the future. Darragh MacAnthony, founder and chairman of MRI, says, “We are one of the world’s top real estate companies and have achieved this status by working with quality partners like Fairinvestment.co.uk. “Not only does Fairinvestment.co.uk offer a property search service, but can also help potential foreign property buyers with overseas mortgages and foreign currency exchange.” October 2008 ? EXPAT INVESTOR 23 86 38 37 lenders have cut rates, so borrowers looking for a new deal can take some comfort from the fact that the situation is steadily recovering. Fast Facts 88460 August 2008 3,748 6.90% 7.13% 6.58% £964 £1,063 80% 0 2 21 73 25 13 House prices to stop falling within a year ? 61% of estate agents expect house price falls to stop within 12 months ? 28% of estate agents think it will take 1–2 years ? Homeowners expect prices to stop falling in 7 months ? No homeowners think house price falls will last longer than a year The majority of estate agents (61%) believe that average house prices in the UK will stop falling within 12 months, according to new research from Abbey Mortgages. Estate agents’ view In a survey of estate agents, 30% stated that they believe house prices will stabilise in 0–6 months and 31% think it will take 6–12 months. A further 28% believe that we will experience further house price falls for 1–2 years and 7% think it will take 2–3 years for house prices to stop falling. Just 2% of estate agents think that declining house prices will last for longer than three years. Homeowners are more optimistic The average homeowner also believes that house prices won’t experience a prolonged decline, speculating that prices will stop falling in seven months on average. No homeowners think that house price declines will last for more than 12 months. The vast majority of homeowners (79%) are prepared to wait for any further house price falls before they make a decision on whether to move. A further seven per cent of homeowners plan to take advantage of house price falls in the next 12 months by either snapping up a bargain and moving to a larger home or by selling their home and moving to rented accommodation. Phil Cliff, Director, comments, “Estate agents and homeowners believe that, despite current movements in house prices, we are unlikely to experience a really prolonged period of house price falls. “Most think the period of decline will be over within a year and a very small minority think it will last longer than two to three years. While this is ‘light at the end of the tunnel’, it implies that estate agents and homeowners are bracing themselves for further falls in the very near future.” Fast Facts 88461 Find your perfect overseas property