Mortgages: what a difference location makes
Differences between the English and Scottish housing markets underline the importance of location – a factor that every would-be homebuyer should consider carefully, says financial solutions company ThinkMoney.com.
[UKPRwire, Mon Sep 08 2008] Commenting on recent figures from the Council of Mortgage Lenders (CML), financial solutions company ThinkMoney.com reminds potential homebuyers of the need to think twice about the location of their proposed purchase.
In Q2 2008, there was an 18% quarterly increase in ‘loans for house purchase’ (mortgages) in Scotland – a year-on-year decrease of 34%. These figures were significantly more robust than the Q2 figures for the UK as a whole: a 5% quarterly increase and a year-on-year decrease of 46%.
“The issues in the mortgage market are affecting the whole of the UK,” said a spokesperson for ThinkMoney.com, “but the availability of mortgages does vary greatly from country to country. Prices are, of course, a key factor in determining whether people can get on – or move up – the property ladder: in May 2008, the average house price in Scotland was £167,126, according to the Department of Communities and Local Government, while the average UK house price was around 30% higher, at £218,151.
“What these figures highlight is the sheer scale of the price variations in different parts of the UK – but there’s no need to move country to benefit from this, as the price of two similar properties a few miles apart can easily vary by tens of thousands of pounds. Any would-be buyer would be well advised to broaden their search to include nearby areas: unless there’s a significant difference in terms of amenities, a lower price could more than compensate for any minor compromise they have to make.”
At a time like this, when prices have dropped substantially, a slightly more flexible approach to house-hunting can really work in a buyer’s favour – especially if they’re a would-be landlord and therefore less likely to be ‘tied’ to a certain area. “Lower prices always give homebuyers a chance to buy a better property and / or put down a larger deposit, but in today’s mortgage market, a lower price can be particularly attractive.”
Since deposits are measured in terms of percentages, a sum that counts as a 23% deposit on one house could easily account for 26% of the value of another. In some cases, this could give access to a significantly lower rate of interest; in others, it could make the difference between being offered a mortgage and being refused.
While mortgage providers have always reserved the best deals for people with larger deposits, the disparity is particularly noticeable in today’s mortgage market, with the bulk of the recent rate cuts benefiting people with larger deposits far more than those with less to lay down.
Finally, when house prices are dropping, no would-be homeowner should buy property without weighing up the odds of losing money on it, and comparing this with the money they’d spend if they continued to rent. “This isn’t a straightforward equation. Even though homeowners face the possibility of negative equity (carrying a mortgage that’s larger than the value of the property), they also know that house prices are bound to recover sooner or later – but any money spent on rent is gone for good.”