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 Maidenhead property was £7,552, 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 Maidenhead 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 Maidenhead first-time
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 Maidenhead property goes up for starter
homes and that enables other Maidenhead homeowners to move up the property
ladder.
First-time buyers are the lifeblood
of the property market. They are, however the most susceptible to interest rate
rises and the affordability of mortgages. With that in mind, let us see what is
happening to them…
The
average value of a Maidenhead property is currently standing at £569,444 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 commonplace 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 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, Maidenhead 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 Maidenhead 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 Maidenhead
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, a final thought for
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 Maidenhead -
a bit of light hearted fun albeit on serious topic.
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