House share property owners could struggle in future
December 18, 2007
According to a recent report only 44% of consumers that have graduated in the last ten years have managed to get their foot onto the property ladder in the current housing climate, and out of these a whopping 72% have only managed to do this by pooling their funds with a partner, friend, or family member in order to get onto the property ladder.
Rocketing house prices and high interest rates have made it extremely difficult for first time buyers to go it alone, which is why so many have had to look at sharing a mortgage with another party.
However, according to industry officials these house share consumers could struggle in the future because the majority will not be able to afford to buy their partner out. In a survey carried out by Scottish Widows Bank it was suggested that nearly 70% of those with mortgage shares did not think they would be able to raise the finance to buy their partner out if they wanted to do so. This means that if the friendship or relationship turns sour the homeowners would still be tied to one another because of the mortgage.
According to the Halifax House Price Index the average house price has rocketed from around £69,000 in 1997 to around £198,000 in 2007. This rate of inflation has made it impossible for most first time buyers to consider purchasing a property without sharing the commitment with another person. Lenders have tried to ease the situation, and have been offering guarantor loans, 100% mortgages, and special deals on ‘mates mortgages’ for those looking at teaming up.
An official from Scottish Widows stated: ‘First-time buyers are increasingly pooling their resources in order to get on to the property ladder. In principle, with a widening gap between earnings and house prices, it is a good idea, as it can help overcome some affordability issues. Two salaries stretch further than one. However, this is not an arrangement that people should rush into. Nobody wants to end up in a situation where they find it extremely difficult to share a home with someone they no longer get on with but can’t afford to do anything about it.’
Alan Wright
18th December 2007
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