Almost a quarter of homeowners whose fixed rate deal ended this year experienced financial difficulty meeting the higher rates of interest.

In a recent survey The Bank of England found that 22% of the 2,000 homeowners questioned admitted to finding it hard to meet the higher rates of interest once their fixed introductory interest rates reverted to their lender’s Standard Variable Rate (which is usually the most expensive).

Due to interest rates being raised 5 times throughout the past year, the average homeowner experienced an increase of £59 per month on their mortgage repayments.

House prices in the UK are predicted to drop by 10% next year, according to Morgan Stanley.

With early signs of a slump in the property market, 2008 could see an end to the UK’s property boom which has lasted for the last 10 years, as a result of banks enforcing stricter lending criteria and the slowdown of economic growth.

A drop in property values could result in many homeowner’s properties being worth less than the mortgage secured against it, known as ‘negative equity’, and may lead to an increase in number of repossessions.

It is estimated that by the end of next year, property values will have decreased to the prices where they were at the end of 2006 

Right - our first post!

And what else can we talk about except one of the most dramatic financial events of the past year - the US subprime crisis, which as a result has had a noticeable effect on the UK mortgage market.

For a bit of background on the recent US crisis, we recommend visiting the BBC’s website:

 Beginners Guide to the US Credit Crisis

As a result of the US’ subprime crisis (and the subsequent effect it has had on the UK’s mortgage market), many mortgage lenders have restricted the number of subprime products on offer to borrowers with impaired credit. Lenders have also imposed stricter criteria for borrowers when they apply for a mortgage - long gone are the days when a borrower could get a 100% mortgage with impaired credit!

There have also been changes in the way in property valuations are being carried out when applying for a mortgage. A valuation is the estimated value of a property, which is undertaken when an application is made for credit to be secured against a property (such as a mortgage or remortgage). Homeowners are now finding their properties being downvalued, resulting in them being unable to borrow as much against their home.

So, how will this affect the average homeowner? Well, if you suffer from severe adverse credit, you may find it increasingly difficult find a new deal, as lenders will simply refuse to lend to you - classing you as ‘too risky’. Borrowers with light adverse credit may also notice the affect - whilst in the past those with blemishes on their credit record wouldn’t have required a specialist mortgage product, with the stricter criteria these borrowers will no longer be eligible for prime mortgage products.

However, it’s not all doom and gloom - there still are sub-prime deals available, and some at competitive interest rates.

Through this blog we aim to keep you up-to-date with the latest developments in the property and mortgage market.

With many experts predicting a drop in property prices, and possibly a recession, it looks like 2008 will be a year of dramatic changes. To keep our customers informed, we’ll post any important, and how you can and make sure your home continues to be a sound investment for the future.

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