Our friends across the pond are experiencing an 8-year high in foreclosures, according to this article in today's NY Times. Their housing market, like ours, has seen tremendous growth over the last few years, but in other ways, it's not so similar. I had no idea that only about 5% of British mortgages are fixed rate!
I have a friend who used to live in London and I talked to her a lot when she was in the process of buying an apartment a few years ago. She had a steady but not high-paying job, and only worked 4 days a week, so it was always tough for her to make ends meet. She had saved a bit of money by living in fairly horrible places for many years, and finally wanted to own a home and have more control over her own environment. She took advantage of some kind of "shared ownership" program-- basically, for those with moderate incomes who won't qualify for a large mortgage, an agency buys half your property for you and then rents it back to you. For her mortgage, she told me she was getting one with a fixed interest rate for 2 years which would then adjust every year thereafter. That worried me a bit, and I thought she was being scammed when she claimed it was a typical thing, but according to the NY Times article, that is exactly the kind of mortgage most Britons get.
Anyway, it worked out for my friend-- she only owned her apartment for about 3 years, and then sold it for a moderate profit, which she then converted to a much weaker currency when she moved to a different country. At the time, we thought she might have gotten out just in time, thinking the housing market there would start to slow down as it has here, but according to the article,
If there is a silver lining in Britain, it is that, unlike in the United States, home prices are still rising, for now, after more than tripling since 1997. Recent interest rate increases have yet to reverse the trend. In fact, the National Housing Federation recently predicted prices would rise 40 percent in the next five years, elevating the average price of a home, which already costs about 11 times the average British salary, to £302,400, or $618,000.I wonder if the home price to income ratio is even worse in London-- I was always shocked when I'd visit there and look at home prices, in outer neighborhoods in North London that are somewhat equivalent to where I live in Brooklyn. For any New Yorker who wants to make herself feel that her apartment is spacious and inexpensive, real estate window shopping in London ought to do the trick!