by Neil Dixon

Created on: August 10, 2008   Last Updated: January 20, 2009

The decision whether to buy a home now or wait is very tricky at the moment. On the one hand you have very low interest rates for mortgage customers as the Bank of England keeps cutting the interest rate to try and get banks lending again. Deals as low as 2.99% are been advertised on the internet to entice new blood into the market and get the chain moving again.

There is a catch though, you need a fair chunk of capital to put down as a deposit, around 5% is the accepted norm, which in the current climate that sees the average terraced house command 177k. This equates to 7-8k needed as a deposit. Banks are currently unwilling to lend the full price of the property because they have no margin for getting a return on the borrowing should the home owner be repossessed and the bank is forced to sell the property for a much lower price than the property is actually worth. This irresponsible lending on the part of the banks is what started the whole economic meltdown in the outset.

On the other hand for those who have the deposit and can obtain a mortgage in principle there is still the dilemma of the housing market prices as they still keep on falling and potential buyers are wary about taking on such a huge borrowing to find that the dream house they have just bought is worth appreciatively less in 6 months time. The BBC reported a 15.9% drop in house prices in 2008 so the old adage that your money is safe in bricks and mortar seems not to apply to the current situation and many struggling home owners who are forced to sell are finding that there is a significant gap in what they borrowed to what they are now selling there home for. This gap still has to be paid and it is the struggling soon to be ex-home owner who must find those excess thousands that the bank is hounding them for.

As we are all constantly being informed by the media and news channels on the television, we are in the grip of an economic downturn or 'credit crunch' as they have coined it. Interest rates are being set very carefully by the banks who lend us the money to purchase our homes. Mortgage repayments are at a 50 year low for those lucky enough to be on a tracker mortgage deal yet people are still struggling. The uncertain future on the job market is making people even more cautious about taking the plunge on to the property ladder as more large companies seem to crumble before our very eyes. Thousands of people are losing their jobs and with fewer new jobs appearing, the risk of repossession

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