Podcast Summary
UK property cycle and mortgage term length: Consider personal circumstances, financial situation, and risk tolerance when deciding between a shorter or longer mortgage term based on the UK property cycle
Understanding the UK's position in the property cycle can help inform the decision on mortgage term when purchasing a property. Philip, an audience member who is about to purchase his second property, asked about this dilemma. He was considering whether to get a shorter mortgage term to avoid refinancing during a potential recession or a longer term to avoid having to sell a recently purchased property during a recession. The hosts suggested considering the individual's financial situation and risk tolerance. If one has enough equity and can afford higher interest payments during a recession, they might opt for a shorter term. Alternatively, if one can't afford higher payments or doesn't want to sell, they might consider a longer term. Ultimately, the decision depends on personal circumstances and the individual's comfort level with market fluctuations. It's important to consider the potential consequences of each option and weigh the pros and cons carefully.
Mortgage strategy assessment: Assess mortgage strategy based on personal circumstances, not market trends. Refinancing during a crash can be beneficial due to recovering property prices. Five-year fixes are more attractive than two-year products, but individual circumstances may require re-mortgaging sooner. Seek advice from a broker for best decision.
Despite the current economic climate, it's important for individuals to assess their mortgage strategy based on their personal circumstances rather than market trends. The speaker emphasizes that unless we're in the midst of a property boom, property is generally steady, and refinancing during a crash can be a good option due to recovering property prices. Currently, five-year mortgage fixes are more attractive than two-year products due to higher fees, but individual circumstances may require re-mortgaging within that timeframe. The speaker encourages seeking advice from a broker to make the best decision for your specific situation. Additionally, the speaker mentioned that the 18-year property cycle, which was previously a reliable indicator, is currently broken, and the market is not in a boom.
Property market predictions: Focus on present circumstances in mortgage seeking and be aware of potential changes in the law affecting property transactions and investor behavior.
For those seeking mortgages, it's essential to focus on the present and not make predictions about the property market. The market may remain "business as usual" unless in a boom stage, and unexpected discounts in property transactions, like leasehold sales, could be due to anticipated changes in the law. Institutional investors are selling off freeholds in response to potential future legislation that may outlaw ground rent, causing their investments to lose value. This trend is becoming more common and something to be aware of in the property market.
Leasehold property negotiation: A large reduction in offer price could indicate seller motivation or another buyer, but tight acceptance windows and potential leasehold law changes may warrant careful consideration before pursuing the offer.
A significant reduction in an offer to purchase a property could indicate one of two things: the seller is eager to sell and willing to negotiate, or they have another buyer in mind. In this case, a decrease from 185,000 to 30,000 pounds for a property has a tight acceptance window and requires a majority of qualifying leaseholders to agree. Given the potential future changes in leasehold laws, it might be worth considering the long-term benefits of not pursuing this offer and instead waiting for better opportunities. While individual circumstances may vary, the general trend seems to suggest that leasehold properties may become more favorable as laws evolve.