UK Property Market Trends Analysis
The average price of a home in the UK has risen by nearly 400% of the last 20 years. Back in 1987, the average price of a home was under 50,000; twenty years later in 2007, the average price has pushed just over 200,000.
That can be a frightening prospect for any potential buyer, but for a young couple that are considering purchasing their first home. It may be an incredibly daunting prospect to consider being involved in such a large transaction.
Last year the number of people who owned their own home in Britain went down by 84,000. This was caused mostly by increased UK home prices that have risen at an alarming rate since the new century began.
The rise in house prices has far outweighed the rise in annual salaries over the last 20 years. Many homeowners have found themselves in a situation where they simply can no longer maintain their mortgage payments on a home they purchased twenty years ago.
In the same period, the rental market for houses has boomed as many couples find that in the short term, they can pay less per month for rent than they would have to pay for a mortgage.
A couple of other advantages are that you are not responsible for major repairs, which can add up to a considerable amount of money over time. Therefore, it would seem as if renting a property at the moment is a far more viable proposition than purchasing your own home.
However, there are other considerations, to keep in mind when comparing purchasing and renting on a long-term basis.
Lenders have always been less kind to tenants than homeowners, when it comes to handing out loans, especially mortgages. Finding all kinds of loans is much easier if you already have a mortgage, as it is possible to use any equity in your home as security against a loan.
Tenants pay rent for which they never see return, homeowners on the other hand, eventually will own the house, free and clear. This will give them a huge cash amount should they choose to sell. Alternatively, they will have no rent to pay for the rest of their lives giving them more available cash every month.
The recent near disappearance of the hundred percent mortgage, has its downside in that it may be more difficult for new home buyers to get on the ladder. Nevertheless, on the plus side, it means that once the new homeowner has their mortgage their home is far less liable to be repossessed. This is because it is also less liable to slip into negative equity, meaning it is worth less than the owner paid for it.
Another advantage of this down market at the moment is houses are now actually cheaper than they were a year ago. Enabling those who have saved a deposit to find a home at a lower price than they would have paid last year.
Once the market moves upwards again, as it always does, the new homeowner will be in a much better position. Having paid less for their house, and also owning a bigger percentage of the equity in the property.
There are advantages at the moment to renting over buying but they should be carefully weighed against the much more rewarding long-term benefits of home ownership.
Joe Kenny writes for the UK loan and mortgage search portal, http://www.glitec.org. The site offers secured loans, http://www.glitec.org/secured-loans/ or US residents visit Rebuild for refinance, http://www.rebuild.org/refinance.html
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