So, The Sunday Times reports today there is a new level of confidence in the (property) market. The sun is shining, London has a new Mayor and Spring appears to have finally sprung. In the last two weeks alone, some lenders have introduced 100% mortgage products into the marketplace and Nationwide, the UK’s largest building society, upped the maximum age limit for mortgages from 75 to 85. But what does this mean in real terms?
Well firstly, anyone who understands the nature of market forces will accept that economic activity is cyclic. And that some lenders will appear to become more flexible when additional money is needed to keep the cogs of the financial system oiled. Our money keeps the system flowing, in the simplest of terms.
Secondly, whilst a 100% mortgage may prompt celebration, we should be mindful of the fact that a guarantor is always required (eg a parent). So automatically, quite a lot of people, the ones who probably need the 100% mortgage most, will be excluded from the application criteria as they won’t have a parent who is financially sound enough to guarantee the loan.
And thirdly, by upping the age limit for mortgages from 75 to 85, lenders are playing Russian Roulette with life expectancy. This may also impact upon IHT laws or taxes associated with death duties. If a mortgage isn’t paid off and an individual dies with three years’ left to pay on the mortgage, how will this pan out? Could it mean that mortgage companies will introduce a ‘new’ obligatory payment protection policy. And so the spiral (and the questions) continue.
And whilst I am one of the UK’s greatest advocates of individuals of any age stepping up onto the property ladder, I would encourage individuals to err on the side of caution when considering their financial options. The ultimate aim is to take control of a property and create a financial ‘asset’ rather than a ‘liability’. This is one of the fundamental principles I teach at Wealth Dragons’ training programmes.
I want individuals to think in a more lateral way about property acquisition and ownership. A mortgage is just one option. To find out more and to feel confident about your financial future, why not attend one of our training programmes over the Summer? https://www.wealthdragons.com/events/
Photo source: The Sun.
Category: Vincent Wong