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The Horncastle Property Market and 50 year mortgages

Article Simon Jory 2017-07-07
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The Horncastle Property Market and 50 year mortgages

50 years ago, in 1967, the first human heart transplant was performed by Dr Christian Barnard in South Africa. In the same year Sweden switched from driving on the left-hand side to the right-hand side of the road. The average value of a Horncastle property was £2,712, interest rates were at 5.5% and The Beatles released their Sgt Pepper album ... but what has that to do with the Horncastle property market today? Quite a lot actually.

I have been doing some research on the current attitude of Horncastle first-time buyers. First-time buyers are so important for both landlords and homeowners. If first-time buyers aren't buying, they still need a roof over their heads, so they rent (good news for landlords). If they buy, demand for Horncastle property goes up for starter homes and that enables other Horncastle homeowners to move up the property ladder.

First-time buyers are the lifeblood of the property market. They are, however the most susceptible to interest rate rises and the affordability of mortgages. With that in mind, let us see what is happening to them...

The average value of a Horncastle property is currently standing at £204,535, with UK interest rates at 0.25%. As each year goes by, it appears the age of the everlasting mortgage has started to emerge, prompted by these first-time buyers, eager to get a foot on the housing ladder. I was reading a report a few days ago where some mortgage companies confessed that the battle to gain big returns from the property market has led to mortgages that will take considerably longer, than the customary 25 years, to pay off.

Over the last few years, it has been commonplace for first-time buyer mortgages to be 30 and 35 years in length as the 'Bank of Mum and Dad' have been helping with the deposit. Now, some high street banks are offering mortgage terms of 40 years. This means first-time buyers could be paying until their mid 60's. So, a 50-year mortgage does not seem as far-fetched now as it would have been back in the 1970's. After all life expectancy for a male then was 69 years and today its 79 years and 5 months!

Over the last ten years, Horncastle property prices have continued to rise more than wages, therefore, first-time buyers are looking for bigger loans. If this development continues, the only way repayments can remain reasonable is by increasing the term of the loan.

However, there are worries that the mortgage companies are lending money over such a long term, they threaten to leave some first-time buyers with a generation of debt if the house price bubble bursts. Interestingly, when I looked at what had happened to average property values in Horncastle over the last 50 years, there have been bubbles. First-time buyers should take heart, since as a county we have always recovered from it a few years later.

Horncastle Average Property Prices.png

What if interest rates rise? Looking at historic UK interest rates, the current rate of 0.25% is at a 300-year low. Mortgages will never be cheaper. I would, however, seriously consider fixing the rate to cushion any future potential interest rate rises (since they can go in only one direction when they do change). If Horncastle first-time buyers see buying a home as a long-term decision, based on the last 50 years, they should be just fine!

Historical UK Interest Rates.png

Sources:

  1. Average House Price taken from ZPG-Zedindex
  2. Growth based on ONS growth nationally

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Simon Jory

Simon Jory

Simon has been in Estate Agency for over 32 years and is a Fellow of the National Association of Estate Agents. Having working in all kinds of changing market conditions he is well placed to advise on how best to sell your home.

Anne Pearce

Anne Pearce

Anne prides herself on working to the highest standards and believes everyone should receive the best possible customer service. With over 20 years' experience she will not miss and opportunity.

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