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  • 31/01/2003
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What should we conclude from the recent reports on predicted house price increases, and where do the...

What should we conclude from the recent reports on predicted house price increases, and where do they leave first-time buyers?

First, it is interesting to note different surveys suggest borrowers are divided in their opinion. In a survey conducted by Woolwich 53% expect house prices to rise significantly and 47% expect prices to stabilise or fall.

However, other surveys show that, on the whole, borrowers remain positive. They would look to refinance against the negative market conditions such as lower earnings, lower bonus payments and the likelihood of higher personal taxation.

A separate survey from Halifax has predicted an overall property increase of around 9%, but with different increases depending on geographical location. In 2002 the East Midlands were seen to rise by 42% and West Midlands by 35.8%. In contrast London had a 19.4% increase, the South East 25.8% and Scotland 11.6%. At the end of 2002 the average home cost £121,794 ‘ an annual increase of 26.4%.

The opinions of a select number of brokers in a recent survey by Mortgage Intelligence predicted an increase of between 5%-10% with a continued levelling of prices in London.

They were not expecting a repeat of the late 1980s, but all agreed the North was catching up and highlighted property hotspots, such as Nottingham, Liverpool and Newcastle.

With the base rate remaining at 4% yet again, high levels of employment and the low proportion of earnings taken up by mortgage repayments, the indications point toward a solid foundation for housing demand over the coming year.

The difficulty is the increasing number of first-time buyers without sufficient funds to take that first step. As they are vital to the entire market, every opportunity should be investigated to help them take that first step. One option would be to check out the local area for housing associations offering shared ownership.

A valuable website ‘ www.housingcorp.gov.uk/yourhome.htm ‘ takes you to the shared ownership part of the site. Providing customers can prove they cannot afford a normal mortgage, they only need to prove they can afford the cost of the mortgage share and rent for the share they do not own.

In most circumstances they would need to be working or living in the area and specific schemes exist for certain occupations such as teachers and health workers. High-street lenders such as Abbey National, Lambeth, Nationwide, Portman, and Woolwich lend on shared ownership, with varying requirements ranging from minimum 25%-50% share purchase, with a maximum of 95% of the share.

Sally Laker is managing director of Mortgage Intelligence


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