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There is considerable uncertainty at the moment about the future course of house prices in the UK.
Many commentators are predicting a crash, while building societies and estate agents are still fairly optimistic.
While we cannot give advice on individual cases, we do suggest that all market participants (both lenders and borrowers) exercise caution at the moment.
Consequently, here are some tips for those who do wish to buy:
- Don't overstretch yourself. Historically, buyers with 100% and over mortgages for more than three and a half times their incomes have faced much higher risks. Consequently, such borrowing should be avoided.
- Never borrow more than you could afford to repay if interest rates rose by 2 percentage points.
- Steer clear of dodgy areas and dodgy deals; these never sell in recessions. For example, when buying a two-bedroom flat, make sure both bedrooms are of a good size.
- Never buy somewhere that you wouldn't be willing to live for four or more years
Over four hundred thousand dwellings were repossessed in the slump of the early 1990s. Of course, many of these people were just unlucky. But those who had borrowed more than three and a half times their incomes, and had no deposit, were much more likely to be repossessed.
In addition, dwellings in difficult areas or with quirky and unusual features became much harder to sell than more standard properties.
The bottom line is to buy somewhere that you like, and that others will like, but not to stretch yourself too far. And be prepared to live there for some time.
Last updated: 19 April 2004.
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