An Englishman's Home is his Castle - on Credit
In nineteen fifties Britain most people rented their home from either a private landlord or the local council. But in the last twenty years things have changed completely. Now the majority live in homes that they own. A housing boom in the nineteen nineties has seen the price of an average home in the UK "go through the roof." Just recently, however, prices have started to come down. But what does this mean for the average homeowner? Peter Barkworth, a mortgage specialist in Britain, reports.
Prices of homes in the United Kingdom vary greatly, as in other countries, depending on the type of dwelling and location; a semi-detached house - the typical house in the UK - can be bought in North Wales for around £12,000 upwards. However, employment in such areas is low and there is little opportunity of turning your home into an investment. The same house in London will cost around £160,000. A small flat in central London might cost anything from £250,000 to a million pounds, and is very likely to go up in value over time. Huge price increases over the last ten years are great news for sellers in the capital, but often deter key workers (teachers, nurses, policemen and council workers) from buying, or force them to leave the city.
The nineteen nineties saw house prices shoot up: the average by about 20% in some areas. Borrowing money in the UK is cheap at the moment if you fulfil certain criteria. You have to be employed, with a good credit record, etc. This is the way the British get a foot on the property ladder. They can go up the ladder by buying a more expensive home later and statistics show that homebuyers move house, on average, once every seven years in England.
How to buy
You might see a house for sale simply by walking past and noticing the "For Sale" sign outside. This always displays the name of the estate agent who is selling the property for the owner. The agent does everything for you, and charges about one per cent of the property value. But you don't have to walk the streets to find a house for sale. It's much easier to visit the estate agent's; this is really a shop with leaflets showing lots of important information about each property that is for sale, and includes a photograph.
If you like what you see, you can arrange with the estate agent to visit the property. This is an opportunity to ask every question you can think of. A tour of the property will allow you to see it with the naked eye, which is more realistic than the estate agent's upbeat description and glossy photograph.
Is it what you hoped? If so, you can start to arrange a mortgage. You can visit the banks and building societies for advice; borrowing so much money is a serious undertaking, and you must manage with this debt for up to 25 years. After all, some building societies offer over 20 different types of mortgage. Unless you have some understanding of what type you need, you could pay more for your credit than you should, or you might not repay the money in the most convenient way. Most mortgages are variable rate, which means the interest rate that is used to calculate the credit can change - it varies - depending ultimately on the interest rate set each month by the Bank of England. This can be good if the rate is low, but can eat into your spare cash if the rate creeps up. A fixed rate mortgage has a slightly higher interest rate, but it stays constant for a set number of years. In this way, you will know what amount you will be repaying over the next two to five years; it will then change again. This means that if the Bank of England rate goes down, you'll be kicking yourself; if it goes up, you can feel safe and smug. You get stability, which is what many people want.
Here's an example of borrowing money for a house in Britain. If a husband and wife have a combined annual income of £20,000, then the building society would lend such a couple about £47,000. Over 25 years, they would repay approximately £300 per month (including insurance) on a variable rate mortgage. Since the interest rate, currently at 4.1%, is bound to change in the future, they estimate that this couple would repay about £100,000. For British people who are crazy about owning their own home, this represents cheap credit. For them, the headache of looking for a property, arranging the mortgage and keeping up the repayments are well and truly worth it. The home is then yours and no one can take it away from you. No castle ever came cheap.