 If anyone read last week’s newsletter (and I’d be slightly hurt if it wasn’t read by all) then one of the first things I quoted was the Nationwide Price Index average house price rise of 0.9%. It didn’t take long (a few hours actually) for Halifax to release their figures which showed a decline of 1.9%. Confused? Well you should be – trying to guess the bottom of the market is an impossible task; however it is useful to see what is happening on the wider scale. For what its worth, my prediction is (still) Quarter 3 will see the market flattening before it starts to pick up, albeit slowly, in 2010. There’s one group of people, however, who are quite literally trapped living in their homes at the moment no matter what happens to house prices. These are the many people who took out self-certification mortgages and would need a new self-cert mortgage to move. No self-cert = no move.
For those that couldn’t prove their income in the traditional way, e.g. temps, freelancers or self-employed, then self-cert mortgages offered a way forward. (Please note they were not designed as a means to be dishonest or inflate income on an application form in order to achieve a bigger loan.) I’ve had an interesting couple of conversations this week which have highlighted what I can only describe as a ‘Property Ladder Predicament’ (that’s Property Ladder as in Sarah Beeney). I sometimes watched that programme and wondered how people managed to buy a house, do it up, sell it, give up their job and then buy another house. Self-cert mortgages were really for the benefit of self-employed people, as their earnings are often irregular and they do not receive a set income each month so didn’t always meet normal lending criteria. However, this has now all changed. You see, self certification mortgages have all but dried up and those people are basically finding themselves unable to move now even if they have equity in their property. (What did you think I was going to write?)
Take an example, Mr Smith, who has made £100,000 last year via property development and after selling a property has bought another property with a self certification mortgage to also refurbish. He buys the property and whilst living there the credit crunch happens – he is now faced with a reduced equity and now the inability to secure another self cert mortgage. So unless he can port his current mortgage - he can't move. Why? Because there are no self-cert mortgages left and full status lenders aren’t happy with his income and won't lend to him. So until self-cert mortgages return we are going to find many self employed/self certification mortgagees simply stuck in their house - unable to move until the self cert market returns. Sarah Beeny (unlike many of her viewers) is happily still employed by Channel 4, and so won't be affected. I know, hardly the worst outcome of the recession/credit crunch, but clearly this is going to have some impact on house prices. And now in the spirit of Watchdog: If you feel you have been affected by any of the issues raised in this weeks blog, please write to Ms Sarah Beeney, c/o Channel 4 and ask for your money back. |