With the Bank of England recently announcing another rise in interest rates, there has been mounting pressure on some households' finances. In April, interest rates rose to 5.5%, and some financial analysts believe that a further increase is already likely, with rates reaching 6% before the end of the year.
Meanwhile, recent figures released by the Council of Mortgage Lenders (CML) show that first-time buyers are borrowing on average 3.33 times their income to buy a new house, with interest payments accounting for 18.7% of the average first-time buyer's income - the highest proportion since 1992. Furthermore, the CML findings also suggest that the average mortgage taken out by first-time buyers between 2005 and 2006 increased by 11.72%, while income rose by only 9%. Similarly, in March 2007, the average first-time buyer mortgage was 9.96% higher than the same period last year, but income only increased by 5.89% in comparison.
As a result of the rises in interest rates over the past year, fixed-rate mortgages have become extremely popular with home buyers as they seek to stabilise their borrowing costs, and this type of mortgage currently accounts for 78% of all new mortgages arranged. However, the CML have warned existing homebuyers to prepare for higher repayments if their current mortgage deals are likely to expire in the next year or so. CML claim that 1.3 million people took out a fixed-rate mortgage in 2005, with a further 1.5 million doing so last year, and the body estimates that most of these borrowers will see their mortgage rates rise by up to 1.5%.
Rapidly rising house prices is also forcing more first-time buyers to pay stamp duty when purchasing their first home, with the proportion of those who purchased a property valued above the threshold rising to 58% in April this year - up from 51% a year ago.
The rise in interest rates has resulted in many home buyers struggling to make the step onto the property ladder. With many first-time buyers using either all or most of their savings to use as a deposit, taking out 100% mortgages or in some cases asking family for financial aid, it is now especially important to shop around for a competitive mortgage. First-time buyers are particularly attractive to lenders, and most mortgage providers have special deals and available for first-time buyers.
If you are in the market for a first-time buyer mortgage, don't just grab the first mortgage you can. Instead, explore all the possible mortgage options to find the best one for your needs - it could save you a lot of money!
You can spot ?alligators? of all sizes in real estate investments by their ability to ?eat? away profits. How did we get ?alligators? in California where the housing market was soaring? I'll tell you how. Properties that won't sell eat away at pure real estate investing profits. On the market for months and no deal yet. Monthly payments, taxes, utilities, insurance. Ouch!! What a nightmare!
Robert Kiyosaki, best known for his Rich Dad, Poor Dad series of motivational books, talked about ?alligators? that just keep eating and eating away at would-be profits and he's right. But is real estate investing endangered in California? Not by a long shot. How about the rest of the country? The old ?as California goes, so goes the country,? right? The great thing about investing in real estate is that there is always an opportunity to be had right around the corner no matter what the doom-and-gloom sayers say.
You might ask, ?Will we invest the same way we did when these same properties were selling in hours or days, not weeks and months?? The answer is ?a big fat NO!?
Another question to consider, ?Will we be more cautious?? A resounding ?absolutely!?
The key to investing in a market with so many ?alligators? is to buy right and buy smart. Buy right and you won't be so concerned about the sale. Buy right and you can move your property to another investor or just offer it well below market value to a homebuyer. Buyers are thrilled because they get a great deal, and you have plenty of wiggle room and still come out ahead. Buy smart and consider the timing. You may find that ?alligators? in California, or anywhere else in the country for that matter, create many motivated sellers. Find a way to solve their most pressing problems that will also give you an advantage, and you will create a powerful and persistent stream of income.
Buy right and you control the deal instead of the deal controlling you. If you bought too high then the ?alligators? will be after you. If you have made this mistake, you will know it because the tell-tale sign is that your profits are whittled away every month, and there is no end in sight. Is your property ?cash-flowing? or costing you every month? Do you have a viable exit strategy, or are you fretting as the market ebbs and flows? If you answer ?yes? to the latter, then you have ?alligators? wherever you are.
I have had my share of nightmares in the real estate investing business, and some of them included ?alligators.? However, I will tell you that when you buy right and buy smart, the nightmares go away and so do the ?alligators.?
Both Paul Mcindoe & Michelle Rene Garcia are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Paul Mcindoe has sinced written about articles on various topics from Mortgage, Types of Cancer and Manchester Travel. Paul McIndoe is a recent university graduate whose hobbies include water-skiing and rock climbing.. Paul Mcindoe's top article generates over 8100 views. to your Favourites.
Michelle Rene Garcia has sinced written about articles on various topics from Property Guide, Kitchen Home Improvement and Property Investment. Michelle Rene Garcia is the Founder of Real Estate Investing Roundtable, an investment training company that provides informational resources on a variety of topics for real estate investors looking to protect their wealth and make wise investment. Michelle Rene Garcia's top article generates over 3600 views. to your Favourites.