Best Mortgage Deals
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Best Mortgage Deals - Investing In Property In The UK

best mortgage deals by AnnaNow that we've looked at the US housing market, let's take a look at the UK, and as the saying goes, when America sneezes, the UK catches a cold - please remember, as in investor it's not about finding the best mortgage deals it's about knowing when to buy. I hope that all the information on this site will help you make better decisions, and also find the best deals which should be the last stage in the process. Buying at the right time, and in the right location ( if you have the choice ) are key to your property decisions. Get it wrong and it will cost you a great deal of money. Get it right, ( which often involves being slightly contrarian to the herd) and you should make a great deal. Selling when everyone else is buying, and buying when they are selling is hard, but that is exactly what the large property companies will be doing. The exact opposite of everyone else, and here's a tip ( whether it is property, stocks, shares, commodities anything else ) - if it is mentioned regularly on the news or on TV as reaching record highs, it's time to sell since the public will be jumping on the bandwagon at the wrong time ( as usual) at the top of the market, and just before it falls!! For myself, I sold my portfolio in Hull two years ago - I could have hung on for some more profit, but decided that it was a good time to get out and sit on the sidelines for a while!

Best Mortgage Deals - The UK Cycle

As we saw in the US market, land prices are the key to understanding where we are in the property cycle, and again we see a similar picture emerging. In this case we only go back  to 1983 which is our base year with an index of 100. Land prices are shown as the purple line, whilst house prices are shown in red, salaries and earnings in blue, and build costs in green. For those of you old enough to remember, the last housing crash occurred in the late 80's and early 90's and lasted for 2-3 years. As with the US, this tends to be a typical cycle of an 18 year boom to bust followed by a three year recovery period. As we can see from the chart, land prices took almost ten years to recover to their pre-crash prices.

best mortgage deals land prices UK

Now from our analysis in the US markets, and the chart alongside, it is not unreasonable to assume that the same will happen again, with a prolonged period of land and house prices falling, possibly until 2012, the year of the London Olympics. Many economists and property investors are forecasting that the UK market will fall somewhere between 25% and 40% in value in the next 2 to 3 years. Naturally there will be pockets of the country which I believe will avoid such a correction, particularly in areas where building has been restricted, or limited to exclusive developments. The worst hit will be those who have invested in what I call the "off the shelf" flat - 2 bed, one bath, city centre - the buy to let property of choice ( why? because it involved no effort on the part of the buyer to find one ) I'm afraid those who couldn't be bothered to put the effort in, are now going to suffer very badly. I will cover the buy to let market later, but for now, let's consider the reasons for the current situation.   

Best Mortgage Deals - The UK Situation

Many people believe that UK mortgages are based on the Bank of England rate - they are not! They are actually priced from the rates that banks are prepared to lend to one another. Since the virtual collapse of Northern Rock which I mentioned earlier, these rates have been rising as banks became nervous of lending to one another, in case the bank had mortgage deals in the sub prime arena. The converse of this is that if rates are reduced, this does not automatically feed through into your mortgage repayments, as they once did, so you cannot rely on reduced repayments, even if rates are cut.

With the banks reluctant to lend to each other, three things have happened. Firstly lending rates have risen. Secondly money is in short supply, and finally the banks will only lend to clients with a good credit history. Many of the best mortgage deals are no longer available. A particular feature of the UK market is that of BLT( buy to let) which was sold as the 'pension replacement' and which fuelled much of the soaring land prices above. Now these same investors are bailing out, ironically at a time when rents are rising. The market will become awash with property as desperate landlords try to sell at any price, as falling capital values and rising interest rates, force them into mounting losses. In case you believe this is all fanciful, let me give you some hard facts :

1. The average house is now worth 9 times average earnings

2. In 1993, first time buyers represented 55% of the market - today it's 29%

3. One million householders are using credit cards to pay mortgages and rent

So what would I suggest - two things - firstly I would not be buying if I could possibly avoid it. On a personal basis I am waiting for prices to fall, and will probably be buying in around 2 years time. Secondly, don't buy at the moment, rent instead. I would offer the same advice to most owners and investors around the world at the moment - wait and rent if you can.

Now let's take a look at the some the European property market which is more difficult to predict. Nevertheless if you are thinking of investing in Europe, you will have two big problems. Firstly, making sure the country where you are buying is not about to enter a recession with falling prices, and secondly the exchange rates and in particular the strength of the Euro.  Finding the best mortgage deals will be the least of your problems!

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