Archives May 2019

Birmingham’s resolute housing prices until 2020.

Birmingham’s resolute housing prices until 2020.

This is not a blog about nice places in Birmingham or the surrounding areas. That would be good. But this blog is about a report from Knight Frank, an estate agent in London, about the house prices in Birmingham showing their resoluteness in not responding to the housing crisis since 2009.

In that I mean the average price of houses around Birmingham have not only kept their value but have increased by 45% since 2009, and not only that but have risen 5%-10%, year on year, since 2015. In theory if you had a house that was worth £178,000 and it rose by 5% a year for 5 years. You would have made over £50,000. Which is not bad.

The report shows why this has happened. You can read it all here. (you are now departing from the regulatory website, Coleshill Mortgage Services or Quilter Group are not responsible for the accuracy for the linked site). Its quoted to say the following:

“– its relative affordability compared to other markets in the UK, especially those in the South of England. As the UK’s second-biggest business hub, Birmingham draws comparison with London, the financial centre of Europe. However, when looking at residential property prices, the difference is striking, with newbuild development prices in some central zones of the capital ranging from £1,000 to £2,000+ per sq ft, compared to around £300 to £450 per sq ft in central Birmingham. The affordability trend dovetails with the improvement in amenity and lifestyle in the city, making it a destination for young workers and families alike.”

It’s funny, because it is pretty simple social economics, affordable housing, a place where you can get a decent job, things to do and make your life more richer (in more ways than one) means that the price of housing goes up.

So where does it end. Well we are not sure, do we end up with another London, where house prices get beyond the average earner. Possibly. The idea of a free market is that it will in theory sort itself out. Competition in a free market, means as house prices increase, sales go down and then therefore prices go down a little, everything becomes more affordable, inflation catches up, peoples pay catches up. House prices go up. So on and so forth.

It doesn’t always work like that. At the moment, in terms of buying a house to hopefully increase in price, will always be a risk. It may happen, it may not, so make sure you understand what you are doing, and the risks involved.

But at the moment the report forecasts a growth from now until 2020 in the Birmingham area, so it is always worth a look.

Your home may be repossessed if you do not keep up repayments on your mortgage.

 

Getting a longer mortgage. Make sure you know the facts!

Getting a longer mortgage. Make sure you know the facts!

There was an interesting article in the Observer last week or so. The main crux at the beginning of the article was about the fact that people getting approved for mortgages with a length of 40 years was increasing. Or more importantly had increased. And this was a real symbol of the times we live in today.

I have quoted it below:

“The growth in lenders offering mortgages of much longer terms has been swift. Just five years ago, less than 36% of mortgage products had a maximum time of 40 years, according to financial website Moneyfacts.co.uk. This has now risen to almost 51%.” Find the full article here

(you are now departing from the regulatory website, Coleshill Mortgage Services or Quilter Group are responsible for the accuracy for the linked site).

So what does this mean. Well it’s part of the issue that has been plaguing everyone with a standard job, a standard life. They cannot afford to buy property! Especially in London. The problem is it means that lenders are not getting the new customers they need to maintain growth. You know normal business stuff.

So the lenders in a desperate attempt to make mortgages much more affordable are offering mortgages at a much longer term. They used to average around 25 years. But now they are offering mortgages of up to 40 years. So what does it mean for people on these longer mortgages?

Well firstly, if you stay in the home you have bought and you pay your general mortgage payments for 40 years rather than a standard 25 years. That means if you bought it when you were 30 – The mortgage wont be paid off until you are 70!

Secondly if you want to move, how much equity will you own in the house? Take the following scenario: Your life and pay may have improved, and you had been in your original house for 12.5 years, on an average 25 year mortgage you would have been 50% through your mortgage. On a 40 year mortgage that is only around 25%. That’s a big difference. And if your house has not increased in value. Well you may struggle for that deposit when you sell. So you have to save again. And we have not even taken in interest rates.

And finally we get to interest rates. A longer term in your mortgage means more interest paid over time. Which essentially makes the product of the mortgage just flat out more expensive. So not only can you not afford a standard length mortgage and therefore go for something that is longer; to either reduce the monthly repayments or be accepted by the lender under the strict rules. The mortgage you can get accepted for is more expensive over time. Its really tough spot for people and families desperate to own their own home.

It really doesn’t look good, but when going for mortgage there is options, there always is. Make sure you speak to someone you trust and understands the mortgage market.