All About Loans Weblog

It has been reported that almost 290,000 houses are sitting empty across England despite the fact that a housing shortage is blamed for the spiralling house prices in the past decade.

The report published by Halifax bank shows that although there are an estimated 289,000 homes sitting empty for six months or longer, only a dozen orders have been granted to take control of empty property since the introduction of new rules back in 2006.

The amount of homes that are empty far outstrips the government’s targets of building 240,000 new properties a year,

Whilst the number of empty properties has been going down as prices for homes increased, the fall in the number of vacant houses does not correspond with the rapid rise in house price inflation.

Between April of 2003 and April of 2006 the number of empty properties decreased by 19,675 or 6% of the total number of vacant properties. In the same period the average cost of a home went up by 34% from £134,500 to £179,800.

The shortage in housing has been one of the most cited reasons for the massive rise in house prices over the past decade and the Government even raised the annual building target to 240,000 per year.

Many critics have criticised government targets for encouraging an oversupply of flats in city centres while ignoring the need for more family homes, this is only worsening affordability issues plaguing the housing market.

The majority of empty homes are found in rundown areas which without some investment are not suitable for living in. As house prices continue to fall, some first-time buyers may find themselves able to afford a renovation project like this. That is supposing they can get the loan necessary to fund the purchase. With banks and lenders withdrawing mortgage products from the market, it is now increasingly hard to find an affordable home loan.

A survey that was done by Alliance & Leicester shows that just five percent of the population in Briton are living in their ‘dream’ home, with a large percentage settling for less.  Around 2.3 million British adults out of a total of 46.6 million believe that they are living in a ‘halfway house’, with a further 1.9 million having no emotional attachment to their property at all.

For those living in Wales - the area where people are most likely to have secured their dream property - eight percent scored their home as a ‘perfect ten’.  In London only three percent of those involved in the survey rank their home as a ten on the scale.

With the rise in the interest rates, borrowers are finding it harder to obtain their dream home as it becomes harder for them to obtain affordable mortgages.  Many borrower’s budgets are stretched due to the rising interest rates and many people end up settling for a property that they are able to afford, rather than a property in which they consider to be their dream home.

The majority of homeowners are happy to move into a property that isn’t their ideal home just to move up the property ladder and reap the benefit of the rising house prices.  More people are beginning to look for property based on investment purposes rather than their ideal dream home and become emotionally-detached from their property because they don’t see it as a long-term purchase.

Although many homeowners are dissatisfied with their current homes, many of them expect to remain in their current property for another twenty years or more.  This possibly explains the popularity of secured home improvement loans, as homeowners strive to perfect their home. Other homeowners see cheap loans as a great way of adding value to their ’stepping stone’ house.

Many new homeowners are not aware of the risks of 30 and 40 year mortgages.  They are not calculating the dangers of carrying their mortgages into retirement.

The ForeclosureDeals website states: “If a homeowner can’t make his or her monthly mortgage payments…he or she is usually in forced into the position of defaulting on the mortgage, and then the lender must foreclose on the home. After repossession, the lender is the new owner [and] the property is known as a repo home, property repossession, real estate owned property (REO), bank-owned property, foreclosure home, government home, distressed property, repossessed home [or] commercial seized property.

“Whatever name the properties have, they all have one thing in common – the new owners want to sell them as quickly as possible, often even if that means selling the repo homes at a price well below their full market value.”

Julia Harris, analysts at Moneyfacts.co.uk, said that consumers needed to take into consideration the size and repayment terms of a mortgage.

Harris said: “A mortgage for most of us will represent the largest and longest financial commitment of our lives. For many years the standard term considered for a mortgage in the UK was 25 years, but as affordability becomes increasingly difficult for many of today’s first time buyers, a 25-year term is perhaps no longer considered sufficient.”

Added to this debt is any number of secured loans taken out over the years by homeowners looking to release equity. Wether for home improvements or a holiday, homeowner loans increase the overall burden of debt faced by families.

“It’s a frightening thought to think you could potentially be forking out for that hefty monthly mortgage payment from the moment you turn 18 until the day you retire at 70,” continues Harris.

Research from Halifax shows that Britons are typically adding £5,000 to the value of their homes by adding improvement and renovating their homes themselves through DIY projects. Over the last year home improvement has become more popular with people looking to add value to their home as well as increase their chances of selling their home. The research reveals that almost three homeowners in five have improved a part of their property within the last year, with twelve percent making improvements more than twelve months ago.

Some of the most popular improvements that were done were those that are designed to add value to homes and improve their saleability; redecorating was the top change with two in three applying a new coat of paint or new wallpaper.

Although redecorating was one of the top improvements, many people have been making improvements to their gardens as they are beginning to view their gardens as an extension of their home. Many homeowners feel that it is important to invest more time and money in improving the outdoors just as much as they would indoors, as the garden can make a big impression on some buyers.

As popular as home improvements have become with homeowners, there are some homeowners who are not making improvements with 62 percent stating that the biggest factor holding them back from making any improvements from their property is cost. For those who carried out home improvements, half spent less than £2,500, one in three spent between £2,500 and £10,000 and one in nine spent more than £10,000.

Most homeowners released capital from their home in the form of remortgaging or secured homeowner loans, with a smaller number choosing to use their savings. The most popular amount for a home improvement loan remains £10,000, an increase of £2,000 in the last two years.

The government has now voted against annulling the HIPs program.  The Home Information Program is set to be introduced later in the summer.  This is a major set back for many homeowners, but a boost for homebuyers – unless, it reduces the supply of houses.  In the worst case scenario, the HIPs program will drive house prices up again.

The debate was introduced in the House by a Conservative Party motion calling for HIP regulations to be annulled.  An eleventh hour attempt to foil the plan.  After the vote  234 ministers voted for the motion to annul HIPs, the majority of 306 voted against it.  A narrow 72 vote win.

The pending introduction of the HIPs program has ignited a fire under the housing market.  However, many potential homeowners are wary of these last minute sales.  The HIPs program is only ₤450 and is designed to protect home buyers from unscrupulous home sellers who are trying to unload a ‘money pit’.

Mark Desvaux, managing director of Houseweb, an online marketplace for homeowners who do not want to use an estate agent, has seen an unprecedented increase in the number of properties listed for sale. He said: ‘This advertising campaign is driving people to put their property on the market straight away, as they have now realised that it will cost them more in June.’

Homebuyers feel that this fee will be passed on to them and become apart of their mortgage. The only win-win in this situation are the real estate agents. However, now home buyers and sellers are faced with more confusion.  Those who took out home improvement loans in order to quickly rectify problems around their homes may now be kicking themselves as the goalposts move again.

Your house is most likely the single biggest asset that you own.  So deciding whether or not you want to refinance can become a difficult decision.  So before you refinance your home there are a few things that you will want to take into consideration before you sign the loan documents and put your house at risk.

You will first want to ask yourself about what it is you want to accomplish in the short term and long term with a refinance before you start the refinancing process.  Often people choose to refinance for a lower rate, lower payment, and debt-consolidation or to get out of a variable rate program into a fixed-rate loan.  Some people may be looking to pay off their home as soon as possible with a 15 year repayment term, or maybe they want to have a 30 year term to lower the monthly payment and use the extra income to invest it.  You will then want to determine your maximum monthly payment that you will be comfortable with.

If you are refinancing to release capital, you may be wiser to consider a secured loan instead. You may find that you pay less interest in the long term on this, even if the interest rate is higher in the short term. You may be looking to finance improvements on your home, in which case a home improvements loan frequently offers excellent rates.

You may also want to take into consideration the length of time that you intend to live in your home.  If you plan to move out within a short amount of time then you may want to consider an adjustable rate loan which may be cheaper than a fixed rate loan.  As you step into the bank you will want to speak to your loan officer about your concerns and your plans, as they can help guide you into the right refinance loan that is suitable for you.

The boom in house prices and low inflation are coming to an end, according to an ominous prediction from the Bank of England (BoE).

The central bank said: “We cannot guarantee that the next ten years will be so ‘nice’.” Dubbed ‘The Great Stability’, inflation in the last 10 years has been as low as 1.1 per cent and interest rates dropped to  3.5 per cent.

The Bank’s warning, contained in a memo submitted to the Treasury Committee, is strong enough to ignite rampant inflation and soaring interest rates.

For the first time Britain’s economists are warning that interest rates may need to reach 7.5 per cent.  This is a drastic increase from a few months ago when no one would admit seeing an increase above 6%.  The 6% is the magic number that is expected to see the ‘beginning of the end’ of the current housing boom.

A 7.5% BoE interest rate would be a ‘savage blow for homeowners who have stretched themselves to the limit to buy at today’s sky-high property prices.’ Or those who have taken out secured homeowner loans to increase their property value.

The BoE’s warning is issued only one week after the cost of living shot to 3.1 %.  This is the highest inflation rate seen for 15 years and a substantial increase from the Government’s two per cent target.

Rampant inflation always equals interest rate hike.  This one will be the fourth in less than a year.  It is expected in May, and could be the most startling increase ever seen.

Britain’s debt grew to a record £1.3 trillion, compared to £500 billion when Labour came to power.

It seems the gap between men and women is closing when it comes to wealth according to new figures released.  But whilst men are still following their traditional role of making their money, it seems that inheritance and six-figure divorce settlements are boosting the finances of many woman around the country.  That’s not to say that women are not capable of earning the big bucks of the stronger sex; the rise in the female entrepreneur has been well-noted in the last decade.

This upwards trend is also being echoed in the way that women deal with finance and the risks they are prepared to take to follow their dreams.

The number of personal loans now being taking by women has topped those of men for the first time in the past few years, with career and home improvement loans being the most popular.

Whereas men typically borrow money to buy cars and for holidays, it seems that women’s aims are more long term, with property development and career advancement seen as useful ways of investing money.

“Positive” loan habits are a growing trend among UK consumers. This is in part to concerted efforts by charity organisations and government to educate consumers and help them establish viable debt management programs.

Spokesperson for the Finance and Leasing Association (FLA) Helen Saxon said that some positive ways to utilise loans, including debt consolidation, have been highlighted.

Ms Saxon suggests that debt consolidation loans are useful tools to help consumers reduce their debt. They can help consumers by providing repayment plans that are management.

There are a “range of uses” for loans available from British financial service providers, which are being taken up by consumers for purposes of car buying and home improvements, Ms Saxon said.

Debt consolidation loans for the FLA spokesperson said: “They can be a positive move, because personal loans generally have lower interest rates than credit cards.

“But you do have to be careful if you are consolidating that you don’t run up the debt again and that you can pay off any loan that you take out.”

Research from MoneyExpert.com reveals that six million people consolidated their debts with a personal loan arrangement in the last three years.

Currently, the total money loaned rose to more than £4,000 million, according to the Building Societies Association’s (BSA) figures.

Official figures in February were £4,214 million, more than £1,000 million over the the same time in 2006, according to the BSA’s figures. The amounts approved but waiting for transfer are at a record high level of £4,917 million, compared with £3,646 million in 2006.

Director-general of the BSA Adrian Coles said: “Yet again building societies saw record lending in February, with gross lending the highest ever recorded for that month.”

Mr Coles replied: “These are strong figures, but we may be seeing the peak of the market. The recent rate rises are still to work through fully into the mortgage market.”

Spending your money carefully and sticking to a budget doesn’t mean that you are punishing yourself and not allowing yourself to enjoy life’s pleasures.  If you save up and stash away your savings properly you can then save for a weekend getaway, a vacation, or even buy a new car.  Knowing how to stretch your budget is a smart way of saving up for those fulfilling rewards that you save up for.

One way of helping to stretch that budget is by looking at your energy costs within your home.  First, you will want to check with your utility company to see if they offer any rebates or discounts if you install energy-saving equipment.  By insulating your attic, this will help reduce heating costs during the cold seasons.  When you adjust your heaters, it is best to set it to a comfortable temperature before gradually increasing it.  By turning your heating up dramatically, it can waste energy and increase heating costs.  Buy energy-efficient compact fluorescent bulbs for your home. They last longer and consume little power.  By taking just small simple steps, you can save a lot in the long run.

If you dine out a lot, you may want to look at your spending habits and consider eating in instead.  Dining out for every meal can end up costing you a lot.  Having home cooked meals will not only save you money, but it will be a lot healthier as well.  You should also look at your everyday expenses, such as coffees, snacks, or soft drinks.  These will add up in the long run.  So watch what you eat, and what you spend your money on.

If you are a lot more aware of the money that you are spending, and by making a conscience decision on whether or not what you are buying is necessary.  Not only with food, but with clothes and other various items as well.  By not giving in to your urges you will be able to stick to your budget and save up for that great holiday you deserve.