How buying a home can become much cheaper
You have just qualified as a professional person, you want to plan ahead and you need somewhere decent to live but all the property prices are out of your range, what can you do? If you live in London and need a 1 bedroom apartment close to central London, the prices are likely too high for most graduates and many single professionals, but why? Isn’t London supposed to be one of the leading financial capitals on the planet? Surely, someone in the City of London can come up with new financial models to make purchasing a home much cheaper?
Recently there has been extended loan periods exceeding 25 years and 30 years, but mortgage companies and the council of mortgage lending really need to do the maths and look at 50 years as the norm for first-time buyers. However, the real impediment has to be the rate of interest charged on mortgages. Two days ago, the Bank of England reduced rates to an all time low at 0.25% but the best mortgage rates which you will find are likely to start with a 3 or 4, depending on the mortgage product. In addition, there are a number of insurances which property owners have to arrange and you will find that most insurance policies are renewed annually. Why? Why does it have to be renewed every 12 months, why not 24 months or 36 months to reduce the cost? Surely the insurance companies can do the maths and introduce financial products which run for longer periods and at lower costs. Furthermore, in the case of insurances, the no claim bonus idea ought to be applied not just on vehicles but on all different types of household or personal insurance products. It’s almost like they say in a certain supermarket, “Every little helps.”
This is also a key factor when it’s time to sell your property, as there are hundreds of different estate agents with different terms and fees to consider. Saving money on estate agents fees is always a priority, however as a company which offers estate agent services in central London which is one of the most competitive property sectors, there is a case that the fees should be even higher. Yes, higher!! There is a considerable amount of time and cost which each agency spends in building an ecosystem online to showcase properties, attract the right buyers, challenge and compete to obtain the very best deal for a client who then gains a substantial ROI from the transaction. Whilst there are hundreds of estate agents joining the profession each year and going through the rigorous process of gaining NAEA membership, etc, the churn rate is quite high with large numbers leaving the profession. One key factor is because many deals do not complete and some properties remain on the market for quite some time before eventually being sold below market value or taken off the market. Meanwhile, the agencies are left with the challenge of investing more time in identifying new opportunities to make sales and recover their cost. Many agencies charge less than 2% but this could easily become the minimum when you look at it from a different perspective. As a seller, the challenge is obviously to find the right agency, whether it’s a network chain or a local independent company where you may have a better chance of negotiating the fee. Imagine what it would be like if you are able to save money when selling, secure a longer mortgage period when buying the new home and, get insurances over a longer term to reduce your property running cost. This may soon be the reality if the financial sector starts to listen carefully to customer needs and create intuitive solutions.