Are market innovations really bringing relief to homebuyers
Released on = July 31, 2007, 10:18 am
Press Release Author = Jimwatson
Industry = Real Estate
Press Release Summary = The spiralling cost of acquiring a house has been the subject of discussion in many quarters over recent months. There is mounting concern that people - particularly first-time buyers - are finding it harder and harder to afford to buy a property of their own. This has prompted all manner of schemes and suggestions.
Press Release Body = The spiralling cost of acquiring a house has been the subject of discussion in many quarters over recent months. There is mounting concern that people - particularly first-time buyers - are finding it harder and harder to afford to buy a property of their own. This has prompted all manner of schemes and suggestions.
When Gordon Brown stepped into the role of prime minister last month, one of the first things he did was announce plans to build more houses. House planning restrictions are to be relaxed, he promised, and more land is to be released for the purpose of housebuilding.
In addition, the government has pledged to build five new \'eco-towns\' consisting of 10 to 20,000 new homes. Many of these will be made available under shared equity schemes which are designed to encourage people to obtain their own property by way of part ownership.
However, in practice shared ownership can prove more expensive than either obtaining a straightforward mortgage on a whole property or renting while trying to save for a deposit. Under a shared ownership scheme, the buyer obtains - typically - around half of the equity in the property.
The developer or owner retains the equity in the other half and the buyer pays them rent. This means that as well as making mortgage payments every month, they are also paying rent to a landlord. Of course, the amounts will vary depending on the property and the deal obtained, but it is easy to see how the expense can mount up.
Another by-product of the present housing climate is the rise of the long-term fixed-rate mortgage. Rising house prices have been partnered with five interest rate increases and these mortgages are aimed at buyers who want the security of knowing that they will be paying interest at the same rate for the duration of the mortgage term.
Surveys suggest they are not proving hugely popular - a survey by Abbey Mortgages found that 54 per cent of people would definitely not take out a 25-year fixed-rate mortgage, while a further 23 per cent were unsure. Under a quarter said they would definitely consider one.
Sue Hayes, director of Abbey Mortgages, said: \"It is clear that the public don\'t have much of an appetite for 25-year mortgages.
\"Given the great cultural and economic changes we\'[e seen in the past 25 years, this is not surprising. Few people are prepared to commit themselves to a deal for a quarter of a century.\"
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