Sell and rent back schemes could boom as a poll by BBC Panorama reveals the majority of UK home-owners have been 'unrealistic' about housing affordability.
The housing bubble may not be bursting completely, but the number of home-owners considering a sell and rent back scheme suggests it is certainly deflating. The high cost of homeownership is making itself painfully felt for some. Home-owners who bought their property in recent years, depended on 90% plus mortgages, with no or little deposit, and over-stretched their finances to afford their home, are in deep trouble. A sell and rent back scheme could be the only alternative to the prospect of repossession – especially when you consider many of these home-owners will be coming to the end of their fixed rates.
Sell and Rent Back – Curtailing Debt
It's been calculated that the average property owner will be facing an extra £200 on their monthly mortgage repayments if they are coming off a fixed rate. Lenders simply aren't offering competitive re-mortgage packages in order to safeguard their profits during the credit crunch. For some, they could be paying more than their home is worth as property prices plummet. The housing dream – that property would be a sure investment offering huge profits – is clearly just that, a dream.
Sell and Rent Back as Prices Continue to Fall
The poll by BBC Panorama found that unrealistic property dreams were common. A thousand people were asked about housing affordability, 79% said they felt the UK had been unrealistic as housing prices fell by 2.5% in May 2008. There has been a 40% fall in lending over the last year, adding to the crippled housing market that is still limping along under home-owners dreams. Many simply don't want to face up to the reality, but the black and white bank statements of many home-owners will force them to consider a sell and rent back scheme.
Facing up to the Financial Reality
The poll found that 37% of people were ignoring the warning signals of the credit crunch; they said they would still over-stretch themselves to get on the property ladder. But the proliferation of sell and rent back schemes shows that taking such a blind approach can be financial suicide. The concern is the UK has so fallen in love with the property market and the idea of owning a dream home that the reality of affordability is being ignored. The past decade has been awash with property TV programmes and features, a trend that has been dubbed 'property porn' by the media. The result? More property owners are having to consider solutions to their financial difficulties – a sell and rent back scheme is one way of addressing the realities of their bank balance, while still being able to live in their dream home.