How the last 40 years have seen changes in basic mortgages and investments
The last 40 years have seen significant rises in property prices and also major changes in how we finance their purchase. How buying has changed for one individual and what the future may hold with regards to financing retirement.
July 11, 2012 - PRLog -- Back in 1968 Rob Eastman at the age of 21 purchased his first property, a 2 bed flat that had been built 2 years previously for a price of £4,000. He had a reasonable deposit but obtaining a mortgage was difficult back then, much like it is now. The main source of mortgages was from building societies but there was a waiting list to have a mortgage. Even though Rob met all the lending criteria he had to wait in the queue for mortgage funds, and this sometimes be for months. The building societies actively tried to persuade people to start saving with them by promoting that when you eventually require a mortgage you could jump the queue. Rob had not saved with a building society but his accountant friend introduced him to a broker and he later received his first mortgage with the Leicester Building Society.
Two years later Rob was married and had 1 child. The flat was now too small so Rob and his new family found a new 3 bed detached house for £7,150 and were able to sell their flat for £5,500. However for some unknown reason the Leicester Building Society said that they did not fit their lending criteria and would not finance the new mortgage. Rob then went back to the same mortgage broker who organised the finance for his flat purchase, and this time fixed him up with the Nationwide. Although £7,150 for a detached house might sound cheap today, the house that Rob really wanted to buy was £8,000, but this was way out of reach. A quality family car back then cost £1,000 today this would be more in the region of £25,000.
Eight years later Rob moved again, but had to take out a bridging loan in addition to a mortgage in order to do so. Rob had agreed a sale on their property for approximately £80,000 and buying a new house for £120,000. Upon their buyers having a survey carried out it was discovered that their existing property had a foundation problem, caused by a broken water pipe that had washed some foundations away. The sale fell through but Rob continued with their purchase making use of a bridging loan arranged through his bank. The bridging loan provided the funds that were missing due to the sale of their property falling through, to enable the purchase of the new property to continue. Rob and his family moved into their new home and had the foundation problem repaired at their previous property. Once the repairs have been completed the property was put back on the market and quickly sold meaning that the bridging loan could be repaid.
Today the main banks have generally stopped providing bridging loans, but other lenders have entered this specialist market. For an independent bridging loan broker you can contact http://www.kisbridgingloans.co.uk/
Rob’s first three mortgages were all interest only and he had invested in endowment policies. Although later on he switched to repayment mortgages he maintained his payments into each of his policies until their reached maturity. All of the policies were worth nearly double what had been predicted 25 years earlier. The main reason for this was because no one had predicted the impact of or rate of inflation that we had experienced during that time.
Of course endowment policies have generally not performed so well in recent times along with many pension funds. This has led to many people preparing their own pension funds by investing in property which is then let out on a buy to let basis. This has led to a huge rise in the number of buy to let mortgages and rising rents has further increased demand for them. Unfortunately since the credit crunch buy to let mortgages, like most other finance facilities, have become more difficult to obtain. However, lenders do like this market and are introducing more buy to let mortgage products.
There are many buy to let mortgages available so to find the best deal contact http://www.kisbridgingloans.co.uk/
Due to failing pension funds it is likely that we will see a huge growth in equity release schemes, sometime also referred to as lifetime mortgages. Equity release schemes release money tied up in the equity of your home, roll up all the interest and when you no longer require the home, for example move into a care home or because of death, the property is sold and the mortgage is paid off from the proceeds.