Buying a property has been some of the ways in making a move for investment. Real estate investment offers lower risk, less volatile and generally preserves its value. It also has the potential for steady income generation like leasing an office space in a commercial building, rented out a condo unit or flat, an agricultural land with high yielding crops and more. But before engulfing yourself on making plans on what will be the outcome of the property you’ll buy, you must first consider the kind of loan to avail that will offer you great opportunities. Many homeowners nowadays face the dilemma of making the decision between a variety of loan rate. While this depends on your personal situation, you need to carefully consider the benefits and risks of each rate type.
Variable rate mortgages
Based on the name itself, it is changeable that can either fluctuate up or down depending of the economic factors. This kind usually come with an annual fee, but in return you get discounted interest rates and waivers on some upfront fees.
Fixed rate mortgages
The rate is fix for a set length of period of time which usually ranges from one to ten years. Your rates will not go up, meaning your repayment stay at the same level. This allows you to accurately create a budget plan and ensure that your cash flow won’t have any unforeseen detrimental effect if rates are raised. This kind of loan does have hefty break costs, so ensure that you won’t have to exit your loan early. This option is good for those who think that interest rates will rise in the near future. In an economic climate of low interest rates, opting for a fixed interest rate could help you pay off your loan faster. By making the same periodic repayments, you’ll generally repay the principal down quicker than opting for a variable rate loan.
Split rate mortgages
These loans basically cut your loan into portions and then apply a combination of fixed and variable rates to different portions depending on your choice. You might be able to split the loan into more than two portions and have some at variable rates, and some at fixed rates for different set periods. Split rates can help you see a bit of the benefits and risks of both interest rate types.
Interest only – puts part of each settlement towards the outstanding loan amount (the principal) and part towards the interest due on your loan. It pays only the interest due, thus your repayments are lower but on the flip side, your principal will never get smaller making interest-only repayments, as none of your repayments are actually advancing towards the principal.
As we start to enter 2017 many people are wondering what will happen to house prices during 2017. With Brexit’s effect on the UK economy still making waves and forecasts of a possible British export boom in 2017 there is a good chance we will see house prices surge during this year.
Daniel Morgan, Chief Executive from Property Cash Buyers, said that there had been very positive signs as they started 2017. Their enquiries from both buyers and sellers has increased 150% year on year with the numbers expecting to grow over the next few months.
Mr Morgan also said that he expected to see a drop in the average waiting times to sell a piece of property stock within the UK. In 2016 the average waiting time for a sale to complete was 13 weeks and the online estate agency expect to see this reduce to 11 weeks after entering the first quarter of 2017.
However, it is also noted that there are dangers and possible bumps in the road ahead for the UK housing market. There is the possibility that the UK’s Brexit negotiations could hamper property sales in prime locations such as London due to more caution from the foreign investor sector. That being said with a current 20% drop in the value in the pound against other major currencies it could also be argued this is a great time to look at buying in the UK.
Another potential headwind in UK house prices during 2017 might come in the shape of government policy changes aimed at curbing over speculation in the property sector by investors. After the effects of 2008’s over speculation on new build property the government have started to tighten lending criteria and recently changed the way investment property is taxed.
Overall with the recent change in the economic forecasts and a big uptick in consumer enquires via websites such as property cash buyers we think a rise in house prices is a real possibility as we enter the new year.
The housing market of the United Kingdom has witnessed an upsurge in the year 2016 mainly because of the increase in the stamp duty surcharges. The average price of houses in the UK has grown by 5.3 % during the first quarter of 2016 as per Nationwide. This upsurge in the prices was the highest in the Outer Metropolitan Region across London. Here the prices of houses have increased by 11.9%. The price rise is by 11.2% in London, 8% in Outer South East, 5.4% in East Anglia and 5.5% in the South West. In North West, the price hike is 0.2%, and that in Scotland and the North is 0.5% and -1.4% respectively.
Robert Gardner, Chief Economist from Nationwide, said that there had been a good pickup in the housing market of the UK in the recent months. House mortgage and housing transaction approvals have also risen strongly. This is all due to the changes in stamp duty on the second homes bought by property investors. In this scenario, buyers have come up with more purchases for avoiding additional tax liabilities. However, he further said that this fast-paced growth in the prices of UK houses might get moderate once the changes in stamp duty come into effect from the month of April.
However, it is to be noted that there are great dangers ahead for the UK property market pertaining to the increase in stamp duty. 3% increase in stamp duty applies to the Buy-to-Let purchases. This duty has been levied on top of the stamp duty rates that are already very high. This means that the landlords in the UK considering spending around £1,000,000 for normal-sized houses for converting them into five flats will now have to pay a stamp duty of 7.4% of the purchase price or £73,750. This will be in addition to the other varieties of transaction costs.
The anti-money laundering steps will further hit the property market of London. These steps are to be taken against international property owners. The steps are quite worrying for the property market of London as a huge part of London property owners would be under close scrutiny. They would be identified for the dirty money that they have been using in the London real estate market.