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15 October 2007
First time buyers in many areas of the UK are being advised to wait it out before rushing into taking out a mortgage loan, amidst speculation that both house prices and interest rates are set to fall. Official figures have shown that property prices in the UK have already taken a tumble in September in many areas, although property values continue to rise in Scotland and London. Many analysts are also predicting that there will be a cut in interest rates before the end of the year, which would bring the interest rate down to 5.5% or below.
Over the last year things have become increasingly difficult for first time buyers wishing to take out a mortgage loan. The high value of properties has meant that first time buyers have had to take out a massive loan to cover the cost of the purchase, which has meant huge repayments. Many have been unable to raise a deposit for the amount required – made worse by the fact that there is no previous property from which to use equity – and this has resulted in many buyers turning to 100% mortgages. On top of this a series of five interest rate rises has made affordability even more difficult, making it impossible for many non-homeowners to get onto the property ladder.
Experts are now stating that a little patience could really pay off for first time buyers, as they will be able to reduce the amount of the loan that they have to take out by way of a mortgage if property prices continue to fall, and they will be able reduce their monthly repayments in the event that interest rates also fall. For those that are insistent on purchasing a property before this happens, experts are urging them to steer clear of taking out 100% mortgages. This is because they could quickly find themselves in negative equity if house prices do fall, which means that they will owe more on their property than the property is worth.
One first time buyer from the West Midlands explained why she had decided to take a wait and see stance, stating: "According to the news house prices on the Midlands are going to keep falling over the coming months. There doesn't seem much point going for a mortgage now when I could wait a few months and potentially save thousands of pounds on the price of a property. If interest rates go down in that time as well that is an added bonus. I've already waited a year to try and get my own place, so another few months is nothing."
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