50 years ago, in 1967,
the first human heart transplant was performed by Dr Christian Barnard in South
Africa. In the same year Sweden switched from driving on
the left-hand side to the right-hand side of the road.
The average value of a Grantham property was £2,134, interest rates were at 5.5% and the Beatles released one of my
favourite albums – their Sgt Peppers album .. but what the hell has that to do
with the Grantham Property Market today?? Quite a lot actually... so with my CD
Player turned up loud – let me explain
my friends!
I
have been doing some research on the current attitude of Grantham First timer
buyers. First time buyers are so
important for both landlords and homeowners. If first time buyers aren’t
buying, they still need a roof over their heads, so they rent (good news for
landlords). If they buy, demand for Grantham property goes up for starter homes
and that enables other Grantham homeowners to move up the property ladder.
First-time buyers are the life
blood of the property market. They are however the most susceptible to interest
rates rises and the affordability of mortgages. With that in mind, let us see
what is happening to them….
The
average value of a Grantham property standing at £167,800 and UK interest rates
at 0.25%. As each year goes by, it appears the age of the everlasting mortgage
has started to emerge, prompted by these first-time buyers, eager to get a foot
on the housing ladder. I was reading a report a few days ago where some
mortgage companies confessed that the battle to gain big returns from the
property market has led to mortgages that will take considerably longer than
the customary 25 years to pay off.
Over the last few years, it has
been common place for first time buyer mortgages to be 30 and 35 years in
length as the ‘Bank of Mum and Dad’ have been helping with the deposit (Beatles
Sgt Pepper Song - “With a Little Help from My Friends”). Now, some
High-Street banks are offering of mortgage terms of 40 years. This means
first-time buyers could be paying until their mid 60’s – I can hear that other
great track from the same album "When I'm Sixty-Four"
ringing in my ears! So, a 50-year mortgage does not seem as far-fetched now as
it would have been back in the 1970’s. After all life expectancy for a male
then was exactly 69 years and today its 79 years and 5 months!
Over
the last ten years, Grantham property prices have continued to rise more than
wages, therefore first-time buyers are looking for bigger loans. If this
development continues, the only way repayments can remain reasonable is by
increasing the term of the loan.
However,
some commenters have said there are worries the mortgage companies are lending
money over such a long term, they threaten leaving some first-time buyers with
a generation of debt if the house price bubble bursts. Interestingly, when I looked at what had
happened to average property values in Grantham over the last 50 years, there
have been bubbles. First-time buyers should take heart, since as a county
we have always recovered from it a few years later.
What
if interest rates rise? Well looking at historic UK interest rates, the current
rate of 0.25% is at a 300-year low. Mortgages will never be cheaper. I would however,
seriously consider fixing the rate to cushion any future potential interest
rate rises (since they can only go in one direction when they do change). If
Grantham first time buyers see buying a home as a long-term decision, based on
the last 50 years, they should be just fine!
Before I go, have a final thought
from property buyers in Sweden, the land of Volvo and Abba. As Swedish property
prices are so high, Swedish Regulators announced last year limits on the length
of Swedish mortgage terms. They don’t bother with 50 year mortgages (On
and On and On – Abba).
No, our Volvo loving Swedish
friend’s average mortgage length is 140 years (this is not a typo). Although
such mortgages have had their Waterloo (Abba), regulators have significantly reduced the maximum term of a
Swedish mortgage to 105 years. Either way, that’s a lot of Money Money Money (Abba again – Sorry!)
to pay back!
Now I will leave you in peace as I listen to the 1980’s Madness
song ‘Our House’. My apologies to all the Beatles and Abba fans in Grantham – a
bit of light hearted fun albeit on serious topic.
