Are you a potential home buyer? Have you been scared to death by reports on the TV news and in the papers about the ‘Credit Crunch’? Or did you believe it was just a new biscuit or breakfast cereal?
My view is that you should be concerned, but not paralysed with fear. Having read and listened to the same news reports I decided to conduct some research with our mortgage brokers, Bright mortgage advice.
I asked them to tell me what percentage of the mortgages they arranged in 2006/2007 were for 125% of the purchase price. Answer : 2.5%
I asked what percentage were 100%. Answer: 5%
The balance were 95% mortgage or less.
OK, I’ll admit that the Nationwide have announced that they’ll only offer 90% or less from May 2008 but this really isn’t the end of the world. Let’s assume that we have to use Nationwide and let’s also assume that we really wanted 95% mortgage on the average local first time buyer purchase price of £150,000. This means that 5% is £7,500; so we need to raise another £7,500 from Mum & Dad, relatives or by any other means. Given that the opportunity is there now to negotiate the best deal in terms of purchase price that has been available for probably 5 years plus, then more people should be jumping at the opportunity.
Why am I saying this publicly! You might go and buy a property through someone else - how annoying would that be! Oh, by the way, Bright can still find you a 95% mortgage if you want one.
Looking back over the first 4 months of 2008 I’d like to let everyone know that we are selling more homes than 2007, at well above asking price. Most sales are being agreed in 24-48 hours with competition between, on average, 3-4 buyers. We desparately need more homes to sell to satisfy the demand from prospective buyers. Due to the effects of the Home Information Pack (HIP) contracts are being exchanged in 4-6 weeks, easily.
Did you absorb and believe every last word of that last paragraph? Why not? You’re probably reading it in a newspaper where you can read other stuff that, in our opinion, is just as unbelievable about the property and mortgage market. It’s never as good or as bad as the picture painted by the media. If you want to know about your local property market ask a recommended, local, independent estate agent. Most will tell you the absolute truth.
The whole property market and the stock market works on confidence. George Bush in the USA recently sent each household $600 (£300) to spend, in order to make the economy turn over. They were not able to pay their mortgage or loan interest with it – it had to be used to get the economy turning over by being spent with a retailer. A novel approach, but at least it injects cash right where it’s needed rather than giving Banks discretion as to how or when they pass it on. We are all currently waiting for Gordon Brown’s government injection of£50 billion to add ‘liquidity’ to the mortgage market to do its work.