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Assetsure News 11th July 2007   Assetsure News- Flood & Mortgage update There seems to be no let up in the weather at the moment and many homeowners are becoming increasingly worried about insurance costs. Whilst it is true to say that home building insurance works like all other insurance, on a pooling system, everyone pays in so that those unfortunate enough to suffer losses can make claims. However it should be pointed out that it is doubtful whether increases will be that large and homeowners that have not made claims may be able to take advantage of no claims bonus that is offered by many insurers. On many of the policies arranged by Assetsure a no claims bonus is allowed and this can often make quite a difference to the annual premium. Some people , particularly those that live on flood plains may find themselves being asked to accept higher policy excesses, (the excess is the first portion of the loss that is payable following each and every claim). The standard subsidence excess has been a £1000 for many years and it is anticipated that many insurers may wish to start imposing something similar in respect of water damage claims. As if the wet weather isn't enough to contend with , many home owners especially first time buyers are experiencing mortgage misery. The United Kingdom is experiencing a mortgage crisis at the moment with as many as 18 million home owners being asked to pay increased mortgage costs. The last Bank of England rate increase is just beginning to filter through and mortgage lenders are busy writing to customers advising of payment increases. Interest rates have now risen for  the fifth time in a year and many people have accepted loans  believing that interest rates were likely to remain stable. In an even worse position are the countless homeowners that accepted fixed rate deals that are now coming to an end. Some people are seeing increases in their monthly payments of 1.25% which can equate to an increase in monthly interest of as much as  25%. Recent research suggests that twice as many borrowers as last year have missed monthly payments in the last 6 months, it is anticipated that 77,000 people will fall in to mortgage arrears this year. This increase in mortgage rates is worrying, statistics from the council of mortgage lenders suggest that many first time buyers are now having to borrow as much as 3.37 times their income just to get on the housing ladder. During the last  24 months many people have stretched themselves to borrow money as they feared that unless they did so, they would simply never be able to get on to the mortgage ladder.  This year 18000 people will have their homes repossessed, further the two million people reaching the end of a fixed rate deal may find it difficult to keep up with payments. Anyone that has missed a payment or is struggling to meet payments should speak to their lender as soon as possible, what ever you do don't ignore communications from the lender as this will only lead to an unhappy conclusion, if you keep them informed of problems , they are more likely to be helpful. In one of Gordon Browns first cabinet meetings, the state of the housing market was discussed as were plans to move people on to  the property ladder by starting to tackle the variance between supply and demand. However, everyone knows there are not enough houses to go around and statements from property company Bovis suggesting that it will in fact build fewer homes as confidence in the housing market wanes seems to be making the situation worse. Property prices look set to fall back a little in the autumn months, confidence should  then return to the market especially if interest rates stabilise. Since 1997 house prices have trebled, the average price of a home in Britain is now approximately £185,000. This has seen the personal wealth of many homeowners increase considerably and often equity has been taken out of the first home to purchase a second home for buy to let purposes.  This has created a further strain on a housing market that is struggling to meet demands.  For the situation to ease the government needs to introduce a number of initiatives. Pensions need to be made more attractive so that  money invested in property can be diverted back in to equities. This will be a difficult task as the buy to let boom was fuelled by the loss of confidence in pensions and pension providers.   The government needs to introduce long fixed rate mortgage deals for first time buyers and those public sector workers on lower wages. This will provide confidence for house purchase and prices can be lowered by offering shared equity schemes. There is some good news to tamper all this bleakness with, economists believe that we are still along way from the last housing price crash and no one is daring to predict this will be the outcome of the current crisis. Fundamentally, the country is in a much stronger position than it was 15 years ago, GDP is still growing and we are blessed with low unemployment.. There are early indicators that inflation may be coming under control  although the bank of England monetary committee have not ruled out further rate rises until the current cycle is over. First time buyers are being urged to be cautious before entering the housing market at the present moment. If you are intending to take out a loan, ask what the monthly payments will be at higher levels then check that you can afford payments if there are increases. Paying attention to the press is also good and from this source you may be able to obtain an indication if the market is set to turn. Any one considering buying a property at the present moment should also remember that it interest rates increase again, property prices may fall add at these levels you could easily find yourself in a negative equity situation, something that has not been seen in this country for many years. Anyone that has experienced negative equity previously will tell you that  until property prices rise again and your home becomes worth more than you paid for it, you may find it difficult to move. This can be a real problem for young couples wishing to move up the ladder perhaps needing a bigger home to start a family.   back to top   Copyright Assetsure Limited 2007