dothesums blog

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It is reported in the press that house repossessions in 2009 were 46,000.  It might have been higher had not interest rates been kept very low and that unemployment remained lower than expected.

However, 188,000 borrowers were behind in their mortgage payments and should we see the so-called economic double dip, then we might expect to see the repossession figures rise.  The Council of Mortgage Lenders has warned that there are tough times ahead and forecast 53,000 repossessions this year, with unemployment at 2.4m and 1,400 people losing their jobs every day this may be an underestimate.

We think the crisis is not yet over and that caution has to be exercised in the house buying market.

Most people are forecasting a rise in interest rates and this will probably be the case.  The question is, by how much and when?

Until recently, we thought interest rates would start to converge towards  their long term average.  But there are indications that the Bank of England and some other authorities are now fearing deflation and are watching the numbers with special care.  This means that we have adjusted our thoughts about inflation and consequent interest rates down, in the medium term.

What is also intersting is the emergance of longer term fixed rate loans.  Ten year products have been launched by Britannia and the Co-0perative Bank, at roughly 5.29%, which is about 0.45% above the five year fixed deal from the same lenders.

We think interest rates may stay lower, longer than some people think.

Nevertheless, buyers should do the financial analysis carefully and in some depth if they do not want to lose equity in their homes, or worse.