House Prices on the Up?

1st February 2007

T. Wyn Jones

It is forecasted that by the end of 2007 the average home will cost almost £220,000 compared to £100,000 just four years ago. However there is a danger that the bubble will burst in 2008 if the rise in house prices does not slow down. With banks and building societies preparing to lend a billion pounds everyday the result could be disastrous for both first time buyers and those with a high percentage mortgage who are in essence gambling with their homes.

In 1996 a typical young person took out a mortgage of £40,000 to buy a home and had to borrow approximately 2.3 times his or her salary. Today they are taking out an average mortgage of £112,000 and are borrowing a record 3.3 times their salary. More to the point one in ten homebuyers will take out an interest only mortgage risking financial disaster.

Some sobering facts to consider: -

·Some lenders are prepared to lend up to 7 times a person’s salary.

·Some lenders are prepared to hand out a mortgage worth 125% of the value of the homes.

·It is envisaged that 2007 will be a record year with an extraordinary £360 billion pound borrowed in mortgages.

·And last but not least. Latest figures show the number of repossessions is up by 76%.

What does the future hold? I wish I knew.