Where Are Our House Prices Going?

You've clawed yourself away. The dead money trap of rented accommodation has been left behind. Now, a fertile land of property ladders and structural interior design decisions awaits you. Whatever you've got it's yours, and you're doing everything possible to ensure that nobody is going to change that. So what's the last thing you want to happen? How about a recession, de-valuing your plot?

Now you look like a wild animal caught in the head lamps of a fast moving financial catastrophe. Can anything help? Is there anything that that can ease the pain and bring back the good life? Well I suppose we can take solace in the Bank of England as they stubbornly keep the base rate below five per cent and our monthly payments at an all time low. But what I am thinking about is what if those rates move and there is only one way they're going.

Managing Director of FirstRungNow, Helen Adams gives her view on the future of interest rates in Britain, "I'm sure the low interest rates have been a godsend for many who have been able to take advantage of a large reduction in mortgage costs, for most of us, the largest monthly out-going". As MD of a website that specialises in first-time buyers her expert opinion is that "we may see a small rise in interest rates but the Government will be reluctant to make a big increase - not more than a percent in my opinion - as they want the public to carry on spending."

As with all base rate discussion and predictions, it's more about hope and caution than anything else, as Adams highlights, "Hopefully they interest rates will not go over any previous or unforeseen levels. When a borrower takes out a mortgage they should always consider affordability if the rates do rise. After all, just one percent can make a significant increase for some." When contrasting interest rates with the last recession in 1991, it's easy to see Britain has been very lucky this time round, though it's still early days. Home repossessions were less than anticipated in 2010, but that has not stopped people budgeting to the last penny with laser like precision.

In saying this though, millions of Brit's are only just getting by when it comes to paying off their existing debt, so something as small as an increase in interest could actually be the straw that breaks the camel's back. While it's important to regain control of your finances, it's no use panicking and burying your head in the sand. Adams stresses the importance of obtaining advice if you are struggling when it comes to debt consolidation, "This situation should be avoided if at all possible, though it can be hard if you are getting behind with expensive store or credit cards. After you've cut spending down to the absolute minimum, the first thing to do is to speak to your lender".

She goes on to advise, "see if you can find another way of making the mortgage payments - restructuring the payments. This might mean extending the term, changing the type of mortgage, or even taking a 'holiday' from the payments. Beware, though, this will invariably work out more expensive in the long run". You're number one priority is to ensure that your mortgage/credit history remains healthy, then lenders will be more than happy to help you out. Of course, we are not naive when it comes to the economy, we know that a 'no more boom and bust' economy is an unachievable dream; it's just about planning in order to survive the fluctuations.

It's natural in a system that thrives on speculation and rumour in constant battle with fact and hard data to make the financial system function. So the financial system is always in the thrall of the property market, which makes it a revelation good things can happen and be taken advantage of in a bad housing market. Paradoxically it can be one of the best times to owe money on a property, especially in a country with a struggling market.

Obviously with property prices falling, the big negative equity issue raises its ugly head. But if you don't have to sell your home, what does it matter? "Property price falls leading to the situation where the property value is less than the amount you owe on it are not new," Helen explains, "Neither is it necessarily anything to worry about too much!"

Adams advises that, "The best protection against negative equity in this market is to have increasing equity in your property. Whilst interest rates are low, this is the perfect time to overpay on your mortgage if you can afford to, and build up your equity stake." She stresses that this is important to ensure that you are in a position of security and that it will save you significant amounts in interest. She goes on to highlight that, "one way to protect against rising interest rates is to take out a fixed rate mortgage - or switch to one. This makes it easier to budget though you may incur some expenses to make the change. It might be worth it". As always though, it is recommended that you obtain financial advice when looking to amend your current loan and to always speak with your mortgage provider.

If you have been concerned over the future security of your home, Adams offers a small amount of peace of mind for you. Of course, it always pays to be aware of the current economic climate and it may be worth buying back as much as you can on your property. At the end of the day, this could actually prove to be more rewarding than the tradition of saving up a few pennies from every pay packet.


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Timothy Frodsham works for JustRemortgages.com who aim to find you the best remortgage deals and remortgage rates in the market. Simple really!