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UK Home Loan To Value Statistic Drops Under 60 Percent

by Jim ONeil on August 10, 2011

in Mortgages

The most recent statistics provided by the Council of Mortgage Lenders shows that the average loan to value for a UK home is now under 60 percent. During recent years, many UK homeowners have increased the amount of equity held in their property.

Low loans APR have enabled them to reduce mortgage payments.

The extra money is being used to pay down the loans debt instead of being deposited in the bank, which currently pays little interest on savings accounts. The result is that almost half of UK residents with home loans have a mortgage under 70 percent of residence value.

An additional 25 percent have between ten and 30 percent equity in their homes, based on the value of the property.

Despite the decline in property prices, homeowners continue to overpay their mortgage. Since it may be difficult for many to sell, some are reducing their mortgage balance rather than moving. A higher level of home equity serves as a cushion if the individual must borrow money.

However, it is still difficult to get a secured loan because lenders are wary of risk.

One result of the restricted lending environment is an increase in short term loans. Lenders like Borro offer loans secured by consumer assets like artwork, cars, and watches. Rather than borrowing money against home equity, some homeowners take a short term loan and continue to pay down their mortgage.

By overpaying this loan, they reduce their overall interest payment.

Until savings account interest rates increase, homeowners might continue to build wealth and reduce inflationary impact by overpaying their mortgages. Some are finding cheap loans, due to the low interest rates featured on many mortgages.

When the housing market eventually recovers, these individuals should benefit financially if they choose to sell their homes because they will have a lower mortgage balance to repay.

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