ROOF Blog

Borrowers over 45 have been hit by rising unemployment and falling house prices, and declaring themselves bankrupt at the highest rate of any other age group. Accountants Wilkins Kennedy found that 38 per cent of individuals who were declared bankrupt last year were over 45, and this figure had doubled in the past five years. The research found that as house prices fell people no longer have the equity in their homes to rely on in difficult times.

Asking prices for properties in England and Wales have risen for the fourth month in a row to a six-year high, according to property website Rightmove. The average price has increased by 2.4 per cent, or £5,000, which Rightmove has put down to sellers pricing their homes at a higher level to try to recoup lost equity, and also a halving in the number of new sellers. However, more than 59,000 sellers had slashed their asking price by more than 2 per cent in the past four weeks with the average homeowner reducing prices by 6.8 per cent.

First-time buyers using the government MyChoice HomeBuy scheme to purchase a house are having to pull out at the last minute as the scheme has run out of money. The government said the shortage of cash was a result of the huge demand for it, but experts argue that it has left thousands of buyers without funds to complete their purchases. The HomeBuy scheme allowed applicants to buy any property on the market, not just new builds, by offering an equity loan for 15 to 50 per cent of the property with the balance coming from a traditional mortgage.

The Chancellor has said the economy will shrink by the biggest amount in modern times – down 3.5 per cent in 2009 – before recovering slightly to grow by 1.25 per cent in 2010 and 3.5 per cent by 2010. He has extended the stamp duty holiday until the end of the year for houses under £175,000 and provided an extra £80 million for shared equity mortgage schemes. Other moves include increasing the scheme to guarantee mortgage backed securities to boost lending and the allocation of £500 million to kickstart stalled housing projects, while local authorities will get £100 million to build energy efficient homes.

Durham University housing expert Susan Smith is suggesting a radical overhaul of home ownership. She believes the time is right to create a public-private partnership to make use of ‘housing derivatives’, which would allow a range of individuals and institutions to share in the ups and downs of the housing market. Using derivatives based on house price indices, home buyers could trade lower housing outlays against future gains, first-time buyers could buy in stages and owners could recover part of their investment in times of need. Professor Smith said the new system would mean there is no sharp financial divide between owners and renters, with all properties involving at least some equity share.

Homeowners are taking advantage of falling house prices and lower interest rates and paying off their mortgages, Bank of England figures show. During the fourth quarter of 2008 Britons reduced their mortgage debt by £8 billion. The amount of equity people withdrew from their homes was negative for the third quarter running, as they made the biggest net injection of equity since records began in 1970. For the same period last year, borrowers unlocked £6.7 billion from their properties.

The average starting age for people taking part in equity release schemes has fallen from 74 to 69 years old during the past four years. Increasing energy bills, rising council tax demands and inflation have reduced real income for pensioners, and many see equity release as a way of unlocking money from their property, and supplementing ‘inadequate pension provision’ without having to sell their home or move.

The high interest rates being charged to people with less than 25 per cent equity in their properties is pricing homeowners out of the remortgage market, new figures show. Moneyfacts said borrowers are better off staying on the standard variable rate when their current mortgage ends rather than remortgaging.

The amount of money retired people unlocked from their homes fell to a six-year low during 2008. Falling house prices contributed to a 9 per cent drop in the value of equity released, however volume dropped by only 4 per cent. The researchers said that some of the decrease could be attributed to the increasing popularity of more flexible plans, which allow people to release the money they need in stages, rather than taking it as a lump sum.

Barclays and HBOS were given notice yesterday that they would be sued by up to 8,000 homeowners who took out shared appreciation mortgages in the late 1990s. Solicitors claim the mortgages were ‘unfair’ and that information in the marketing was ‘misleading’. The mortgages allowed older borrowers to release cash from the equity in their properties without paying interest or loan payment during their lifetime. Many homeowners who took out these deals are now unable to sell their properties as they will not have enough left to buy a replacement home.