Homeowners Benefitting from Growing Confidence in UK Housing Market
![Homeowners Benefitting from Growing Confidence in UK Housing Market Homeowners Benefitting from Growing Confidence in UK Housing Market](../../../../images/news/main/news_1721728988.jpg)
Homeowners most likely lack interest in the housing market once they complete their sale. However, how the market is fairing and what is happening in their surrounding area is important. If the value of properties is rising or declining has an impact on their financial opportunities and not just if and when they are willing to sell. This is especially true for when homeowners remortgage and millions will be doing so over the next twelve months.
When a homeowner obtains their first mortgage, they are aware of the term they have chosen, whether it is for example a two-year fixed rate or a five-year fixed rate. It is when the term ends that the state of the housing market comes into play and if it is doing well, then the homeowner could financially benefit.
When a homeowner’s term ends, they have the choice to remortgage or allow their lender to transition them to the lender’s standard variable rate (SVR). The SVR is usually at an interest rate higher than what could be found with a remortgage, and therefore more expensive. In fact, a SVR could be double or more the rates available with a remortgage.
Experts consider a SVR something to avoid as it not only is likely more expensive than a remortgage but could quickly increase when the lender deems it necessary due to influences of domestic or global economic situations or their own costs in lending. A homeowner in a SVR will likely pay more than necessary, risk paying even more should rates rise, and they will miss out on the stability of a fixed rate deal that locks in an interest rate.
Because a remortgage offers savings, as well as peace of mind, it is the smart strategy of homeowners coming to the end of their mortgage term or for those looking to escape their current SVR to shop for a remortgage deal.
During the process of remortgaging, a homeowner will come face to face again with the term “loan to value” or LTV. The amount of the loan in comparison to the value of the property determines, in basic terms, the risk of lending for the lender. In the first mortgage situation for the homeowner, the value of the home was put into comparison of the loan amount to determine the interest rate offers available to the home buyer. The higher the deposit offered by the home buyer brought about less risk in lending by lowering the amount of loan required in comparison to the value of the property.
The LTV comes into play again when a homeowner remortgages. The ratio of the loan to the value of the property will determine the interest rates offered by lenders. This time around, the homeowner due to repayments will have lowered their debt amount. So, there should be less loan required than before, and if the property value has increased, then the LTV will reflect that as well and the homeowner will be offered interest rates accordingly. The less risk for the lender in lending will bring about more competitive and attractive interest rates for the borrower.
Property values can increase for many different reasons. It might be due to improvements and upgrades the homeowner has made to the property both inside and outside. It could be changes in the aesthetics and appearances of the home, or energy savings now in the home due to upgrades made by the homeowner. Property values can also increase if the area the home is located in becomes one of higher demand which could be due to new public greenspaces, or popular schools or convenience of shopping and community amenities.
Property values also increase simply due to demand in the housing market. Home buyers can influence property values if they are buying versus not. Demand pushes up house prices which in turn can increase property values. Therefore, how the housing market is performing takes a turn in helping the homeowner more so than it would have had if they were buyers. Buyers need lower asking prices to make buying more affordable, but once they are homeowners, higher prices increase their property value and if selling, the amount of profit they will have once a sale is finalized.
There are other issues in which property value matters for homeowners, such as the growth of their equity, or the amount of the property they own and is not in debt will determine how much they can cash out if they choose an equity cash release remortgage to perhaps make improvements and therefore increase the property value more.
The outlook for the housing market is extremely positive for the near and not so near future. Home buyer demand is expected to grow as the economy continues to recover and inflation no longer is felt in household budgets as it once did when it was at double digits. Inflation has remained at the target rate of 2.0% for the last two months, which signals the relief will soon trickle down to the consumer level.
House prices have been slowly rising, estate agents and online property shopping sites have all reported an increase in the attention hopeful home buyers are giving the housing market currently. This signals for homeowners the opportunities in remortgaging could be in their favor due to rising property values as it might bring about more competitive borrowing for their unique remortgage situation at a time when interest rates have lowered making borrowing cheaper already.