It's a buyer's market - but how can you ensure you get real value for money?
So far David Kuo's predictions for 2012 have had good and bad implications for many of us, and his third forecast (which you can read by downloading our free online guide) is no different. With house prices expected to stagnate or fall while wages are predicted to continue to steadily increase, we could expect to see the house price to earnings ratio improve for the first time since 1995.
So come 2012, the average British worker may no longer need to borrow 7 or 8 times his salary to buy an average-priced home. In other words, houses may become a bit more affordable. Hurrah!
Of course, you may decide not to wait till then. If you have a decent sized deposit saved up already and know you can afford to buy, why wait? After all, we're talking about buying a place to live, not the latest frivolous gadget. And heck, our predictions could be wrong.
If you do decide to buy now, here are some tips to help you get real value for money in the property market. That way, if house prices do fall, you hopefully won't feel too upset that you bought now.
Value for money
For a start, think long and hard about where and what to buy.
1. If you can afford it, buying a property with an extra bedroom will give you the scope to rent out a room. The government lets us receive up to £4,250 tax-free in its Rent a Room scheme in the 2007/8 financial year (that's around £81/week) making this a great way to help out with the mortgage. What's more, some lenders will even take this income into consideration when making you a mortgage offer.
2. If you do decide to buy, try to protect yourself against having to sell in the near future as if prices come down, you'll suffer. Think about what you need - for example, good transport links, a location near good schools, a garden/garage/scope to extend should all help you stay put for the next few years.
3. Make sure you shop around for the best mortgage. Now this is an important one as it can potentially make hundreds of pounds of difference to you each month. Firstly, read around and get a feel for mortgage rates available at the moment. If you're a first time buyer you may feel more comfortable with a fixed rate mortgage - you'll know exactly how much you'll need to pay each month which can give great peace of mind when working out that budget. However, those with the opinion that interest rates may be coming down in the future may decide to go for a tracker deal in the hope their payments may reduce.
But remember, the rate you pay can make a big difference to your monthly payment. For example, a 25-year, 180k repayment fixed rate deal at 5% will mean payments of around 1,052 each month. Pay 6.5% and your payments would be 1,215 that's an extra 163 you'll need to find each month.
4. However, don't just be seduced by a low rate that locks you in for years after the discounted period as it can cost far more in the end. Likewise, don't forget to take into account the mortgage fees attached to the different deals (check out this article for a great way to fairly compare deals).
5. If this all seems a bit complicated and scary, don't panic as help is out there. For a start, if you don't have a lot of time to phone around or check best buy tables, a broker can be invaluable. You can call them up to discuss the best options for you, and they can do the donkey work too. And as some rates are only available to brokers, you could find yourself with a better deal than you might have been offered directly.
> Remember to ensure the broker is "whole of market" (such as our own, no-fee Motley Fool Mortgage Service) or you could find the deals you're offered are restricted to a small number of providers only.
> This article first appeared in an email.
