UK Property Growth
The United Kingdom is a country divided between the housing haves and the housing have-nots.
With each month that passes, there’s an inevitable house price rise; you can almost hear the UK’s potential first-time buyers emit a united groan. Put simply there has never been a greater gap between earnings and the value of property.
To place it into perspective the average UK house price has risen from £62,453 in 1996 to, wait for it, £179,425 in 2006; a yearly growth of ten point six percent, an increase that effortlessly outstrips income growth.
However, many first-time buyers desperate to get on the housing ladder are borrowing larger amounts that ever before, with some taking advantage of shared ownership schemes, co-buying, asking parents to be guarantors or borrowing money for deposits. This maybe why, despite the big gap between earnings and house prices, that the percentage of homes being purchased by first time buyers has risen.
“Affordability” is the new exhortation for lenders, as the ‘earnings multiple test’ is quickly fading; many first time buyers borrow over the common three and a half times wage, with the Abbey offering five times salary mortgages. Many other factors are now looked at such as whether the borrower can handle the repayments, what their outgoings are and what their possible future earnings could be. Some lenders are looking at how much rent a prospective first time buyer currently pays with some even adding the amount they could charge to rent out a room into the equation.
Many feel that mortgage lenders are basically shuffling numbers to be able to lend money before a rival firm does. This argument is usually countermanded with the suggestion that it will never be in the lender’s interest to lend to a customer who will possibly default on the loan.
Original post by Richard Pettinger