Property Market in UK Taking Dreaded Second Dip

It has been feared for the past several months in the United Kingdom and now it appears to have arrived, that much feared ‘double dip’ of the housing market. Economists have spoken up to say that despite some of the lowest mortgage rates in decades, lending for new houses has dropped to 10% of what was seen in August of 2010 when over £1.6 billion in net lending was done. For the month of September, only a shocking £112 million in mortgages went on and both of these figures are after repayments and redemptions have been subtracted from the lending totals, according to the Bank of England.

Since many consumers are currently facing steep debt, experts are not entirely caught off guard by the new figures. However, it must be said that in the upcoming months, banks intend to implement conditions for good mortgage deals that require those who want the best mortgages to have sizable deposits with that bank. This could drive lending down further, but the banks intend it as a way to stabilize the lending market. Since this trend is set to be long term, according to economists, many consumers in debt are being advised to seek out debt management plans if they want to work their way out of their debt so that their credit can be in good enough shape to eventually be eligible for a mortgage in this new economy.

One economic adviser, Nida Ali, who works for the Ernst & Young ITEM Club went so far as to suggest that the demand for housing keeps going down because those in the UK who are willing to buy are having trouble finding the proper financing to allow them to purchase a home. This, Ali said, along with the fact that more people are beginning to put properties up for sale means that there is a glut of housing with few available buyers which, of course, creates the perfect conditions for this storied double dip. Since the labour market is not looking as if it will be inclined to support an upswing, the dip is set to last quite a bit longer than it otherwise might. In fact, some economists are going so far as to forecast this housing market downturn will keep on rolling through the end of 2011, at least.

The BoE has shown that mortgages being approved by banks are actually down yet again for the 5th month in a row. They now stand at just under 47,500 which is the lowest they have been since February. To top things off, the prices for houses have dropped by an amount even larger than the average UK citizen’s salary. Across Britain, the prices have gone down by 0.7% in September which is just under £2,400 in value lost in the month of September alone per house.

Combined with the fact that the average home price is still out of the reach of many Britons at £164,381 things are not looking good for housing and all of the markets tied in with it right now.

British Homeowners Finding More Value in Debt Repayment Than Savings

Presently, good loan rates are helping to make it easier for home owners in the United Kingdom to pay off their mortgages so many are using this chance to try to pay down debts instead of saving. This may seem odd to some, but UK consumer financial experts show that for those consumers attacking their debt prior to instituting savings programmes for themselves, the amount they save that would otherwise go to pay off the debt works out to more than what they would have earned from a building society or bank savings account. The reason, experts say, is the different in interest rates between both of these activities.

The figures released yesterday by the Bank of England show that, for banks, net lending was down hugely. While August 2010 saw a difference to the tune of £1.6 billion, September 2010 showed just £112 million – a mere 10 per cent of the previous month. Figures released by the British Bankers’ Association go on to show that banks lent slightly more on mortgages, in terms of actual money lent, with September showing £4.6 billion lent compared to the £4.4 billion for August.

Homeowners also repaid their building societies across the UK more than £12 million than they were lent, as a group, for September 2010. In all, since the beginning of the year, September has had the highest repayment amount, a whopping £2.8 billion repaid.

Since mortgage rates are lower than they have been in decades, economists say that it makes sense UK consumers would want to pay down their mortgage debts rather than waiting for the lengthy accruing of interest in savings accounts which typically earn very small percentages of interest back. Some analysts, however, point out that in order to really get back on track, banks still need to lend more to encourage the housing market to rebound and, along with it, all of the retail sectors such as home furnishings and insurance, which help bolster the British economy.

Debt in the UK stands at Double the Average of Europe

The debt capital of Europe is now, unfortunately, Britain. UK citizens are borrowing an average of nearly twice what those in other western European countries borrow.

Credit cards and other unsecured UK debts stood at £216bn in 2005 alone. That is over a third of the total borrowing in Europe for all forms of debt except mortgages. This means that, according to the Datamonitor research firm, the average resident of the UK owes £3,175 and the total personal debt of the UK stands at £1.2 trillion, including mortgages.

According to this report on the market in 16 European nations for borrowing through hire purchases, credit cards, personal loans and overdrafts, the UK has quite the gluttonous appetite when it comes to credit. Compared to the UK average of £3,175 the average European owed unsecured debts of only £1,558.

These numbers are due mostly to the skyrocketing levels of borrowing that have been reached over the last ten years in the UK. Most of this new debt has been created with the aid of credit cards. Compared to most European countries, the British are far more comfortable taking on credit card debt.

Outstanding credit card balances have risesn by over 380% since 1994 according to figures from the Bank of England. While credit card debt may not be difficult for many people to repay, for those facing large debts it can be incredibly difficult to deal with. This is why so many people are turning to Individual Voluntary Arrangements (IVA), debt management plans and even bankruptcy in more severe cases.

The French trailed closely behind the UK in terms of new lending last year while the Germans came in second in terms of the amount of debt currently outstanding. Even though the lending market is overshadowed by the largest economies, smaller economies like those in Greece and Turkey saw the fastest rising levels of borrowing that didn’t include mortgages. Although it went through a 2001 economic crisis, Turkey saw new lending shoot up by 52% between that year and 2005. Greece, during this same time period, saw its debt from unsecured borrowing increase by 29%. Both countries have the fastest levels of outstanding consumer debts out of all 16 countries.

In the case of Turkey, there is barely a mortgage market and that means most borrowing is in the form of credit cards or other unsecured debts. In Holland, the situation is very different and there only 5% of all debt is unsecured because people typically expand their mortgages in order to buy things.

Dealing with Debt

These days, credit in very easy to obtain for those living in the UK. Those looking to led money include small scale money lenders, mail order firms, credit unions, finance companies, insurance companies, credit card companies, building societies and banks. Most of us will eventually require credit in some form or another, whether it is a mortgage to buy a house or a loan to purchase expensive electronics, furniture or a new car. The definition of credit is buying a product or service under conditions that offer you time to pay it off. That credit itself is paid for in the form of interest. Those who borrow money would be wise to check the APR (Annual Percentage Rate) to make sure they are getting the cheapest credit possible.

It’s easier than you might think to end up borrowing more money than you have the ability to repay and when you do that, the resulting money owed is called debt. To word it another way, credit is debt that you have under control while debt is credit that has gotten out of control. Many people end up borrowing even more money against their debts in the hope of clearing what they owe, instead creating an even larger debt for themselves.

When people experience debt problems it is usually due to multiple debts they owe becoming overdue, such as:

Overdue on Holidays (Particularly ‘Fly now, pay later’)

Overdue on furniture payments

Overdue on TV/Video/Stereo equipment

Overdue on car payments

Overdue on electricity, gas or telephone utilities with the result of being cut off

Overdue on council tax with the result of bailiffs or worse consequences

Overdue on mortgage with the frightening result of repossession and subsequent homelessness

Debts have a nasty tendency to ruin lives when they get out of hand so it is crucial that you seriously consider borrowing money each and every time you do so. You and your family’s lives are what will be affected should the situation spiral out of your control. More often than is commonly believed, debt is a cause of the breakdown of a marriage. Your golden rule could be: Never borrow more money than you are absolutely certain you can pay back.

If you do, despite your best intentions, find yourself struggling with debt, take a moment to consider your options for getting your financial life back on track.

A Debt Management Plan or Individual Voluntary Arrangement (IVA) may be exactly what you need to get yourself back into financial health once again.

Debt from Mortgage Shortfalls

If the lender from whom you have mortgaged your home repossesses it, they will sell it in order to get the money they have lost back. In the instance that the house sells for less than what you owe on it, the lenders will require you to pay back the remaining debt. This is called a ‘mortgage shortfall’ and is no longer considered a ‘priority debt’ because the lender can’t claim your possessions as assets. However, they will often attempt to cover the debt for up to 12 years. This article is intended to help clarify options available for those who are being asked to make a mortgage shortfall.

When you are worried you may fall behind on your mortgage repayment schedule or even end up failing to meet the repayments altogether, you will want to get in touch with your lender as soon as you can. Most lenders will try to help you using procedures they have developed for handling payment troubles. The vast majority of mortgage lenders are exceptionally keen to assist their customer base work through payment issues without adding humiliation to the process.

Depending upon your history in making payments and whether you face long or short term difficulties, your lender may agree to one or more of the following:

- They may lower your payments for a certain length of time
- They may limit the time they charge you interest during instead of billing for both capital and interest
- They may offer a ‘payment holiday’
- They may reduce your payments by extending the length of your mortgage
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If you’re struggling to make the payments and depending on your payment history and whether your difficulties are likely to be long or short term, your lender might agree to:

reduce your payments for a set period
charge you interest only for a while, if you’ve got a repayment mortgage (usually you pay capital and interest)
give you a ‘payment holiday’
extend your mortgage term to reduce your payments

For Those with a Mortgage That Began On or After 31 October, 2004

Most mortgages taken out after this date are regulated by the Financial Service Authority (FSA) and under FSA rules, lenders must send you regular statements to inform you of your current position as far as arrears. Lenders must also treat you fairly in spite of your circumstances. The FSA also has rules on what must be done if your home is ever repossessed.

The Financial Service Authority (FSA) regulates most mortgages taken out from this date. Under FSA rules lenders must treat you fairly and send you regular statements to keep you informed about your current arrears position. There are also rules covering what the lender must do if it intends to repossess your home.

How to Deal With Mortgage Related Debt

For those facing debt due to an inability to make their mortgage payments, an IVA (Individual Voluntary Agreement) can be an excellent solution. It will allow you to pay down what you owe over time instead of potentially losing your home. Learn more about IVAs and help ease the stress that a mortgage in jeopardy can bring.

‘Unacceptable’ Availability of Home Loans First Time Home Owners

In order to keep from “deserting” the economy of the UK, many UK banks have been requested to make home loans more available to first time buyers during this present economic slump.

The managing director of MoneyExtra.com, Richard Mason, has mentioned that a “key reason” that lenders continue to remain caution over the past few months is the property market’s apparent volatility.

However, even as house prices are stablised and consumer confidence continues to rise, Mr. Mason explains that banks remain reluctant to resume lending as usual, the requests to do so having “fallen on deaf ears”.

In fact, research performed by the website recently indicates that the number of home loans the market had available fell by 15% in May. That, Mr. Mason explained is an “unacceptable” figure.

“Given the housing market’s recent stabilisation,” he elaborated, “We should be seeing the number of products rise, not fall; there is simply no reason for banks to hold back lending any longer,” he elaborated.

The request comes in spite of the British Bankers’ Association figures that showed the mortgages approval rates rising by 7.4% from April to May.