Whilst the effects of the global credit crunch plays havoc with the UK housing market, many people are struggling to find suitable mortgages. The problem is the same for a whole range of people from first time buyers to those who are looking to remortgage.
Many would think that first time buyers might welcome the effects that the credit crunch is having on the housing market as it is bringing the prices down after years of steady rises. However whilst some properties are becoming more affordable, finding a mortgage that is affordable is more difficult. First time buyers have less choice nowadays when it comes to mortgage providers due to many lenders withdrawing products from the market. The products that are still available often have high rates of interests as well as steep arrangement fees. In addition they are now only available for smaller amounts, meaning that some areas will still be out of reach for first time buyers.
On the other hand, those who already have mortgages are also suffering. Many people who secured themselves cheap two year rates before the credit crunch are now finding that they are due to expire and similar deals are no longer available. In addition thousands of homeowners have found themselves in negative equity after the price of homes has dropped below what they originally paid for the property. Statistics for the UK show that there was a 2.5 percent decrease in house prices during May which is the largest drop in one month since records began in 1991. Since last October the average drop in house prices has reached £12,500. Predictions for the future look bleak with experts stating that they believe house prises in the UK will drop by an average of twenty percent over the next two years. If this is the case, then it is predicted that around two million homeowners could end up with negative equity.
Negative equity is not necessarily a bad thing if people are planning on staying in their current homes for considerable time; as trends in the housing market have shown that prices typically do recover over time. However for those people who are looking to move or need to remortgage during this time then things become a little more difficult. It is estimated that over 1.5 million people will need to remortgage this year and finding a good deal is a tricky business. Those who need to remortgage for more than their house is currently worth will find that the deals will be even less competitive and in some cases they will have no other option but to remain with their current lenders variable rate which is often a lot higher.
Overall predictions for the housing market over the next two years are looking bleak which is encouraging more people to stay put in order to ride it out. There are also fewer buyers as consumer confidence in the market plummets. Those who do need to sell will find they have to lower their prices quite substantially to entice the buyers in; whilst those who do want to stay will find it harder to find competitive mortgage deals. We will just have to wait to see what the future holds
