There's been a lot of chat about this phenomenon but only now are some hard facts coming through.
By David Emerson, Series Producer of Property Ladder
'The first and most obvious impact is a lessening in house prices. London's remained fairly immune but across the rest of the country we're now seeing anywhere between totally flat and five per cent drop in values over the last 12 months. I've talked in previous blogs about how this has to be a blessing in disguise for many people struggling to get on the property ladder, but for those who already have sizeable mortgages, there's a real risk of being caught out by those same falling values. This is how it works.
Lenders are withdrawing their best deals on a daily basis. They are pushing rates sharply higher and getting really choosy about who they lend money to. On top of this, many people are being told their properties are worth five to ten per cent less than expected as surveyors pre-empt a further drop in prices. This makes it much harder to secure a new mortgage deal, leaving some stuck with unaffordable increases to their existing mortgage. Down valuations are also a concern for people looking to pull equity out of their property. What was a favourite trick in the nineties and early noughties is now a much more challenging way to raise some extra cash.
It's all pretty well illustrated by a couple in Nottingham who paid £150,000 for their four bedroom Victorian terraced house in 2006. The price reflected the property's need for a full makeover and they spent £40,000 on the refurb from personal loans. They hoped it would be valued at around £230,000, but £185,000 is the figure they've been given. This means they have been unable to remortgage to the level they had planned, preventing them from rolling their expensive loans into one. Now that's a credit crunching situation.
The views represented in this article are those of the author and not of Channel 4. The purpose of the article is to provide general information only and does not constitute financial, investment, legal or other advice.You should not rely on any information provided in this article and you should always seek out independent professional advice relevant to your own particular circumstances.
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