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The types of mortgages available in the UK have changed, forever.  Now, 8 out of 10 UK homeowner loans have terms exceeding 25 years.

Two decades ago, the longest repayment term was 25-years. According to a report published by Moneyfacts.co.uk, one in four UK mortgage lenders now offer repayment terms spread that exceed 40 years, and 8 out of 10 lenders offer maximum mortgage repayment terms that exceed the traditional 25 year limits.

Julia Harris, analysts at Moneyfacts.co.uk, said that consumers needed to give careful consideration to both the size of the mortgage and the repayment term.

Harris said: “A mortgage for most of us will represent the largest and longest financial commitment of our lives. For many years the standard term considered for a mortgage in the UK was 25 years, but as affordability becomes increasingly difficult for many of today’s first time buyers, a 25-year term is perhaps no longer considered sufficient.”

Ms. Harris stresses that many UK homeowner loan lenders have enticed the young to buy by extending the mortgage term and increasing the income multiples, which increase the amount consumers can borrow.

“It’s a frightening thought to think you could potentially be forking out for that hefty monthly mortgage payment from the moment you turn 18 until the day you retire at 70.”

Debt experts warn UK consumers that homeowner loans that exceed 40 years are dangerous.

A spokesperson for the debt charity Credit Action said: “People are left very susceptible to any sort of circumstantial change” if they agreed to long-term repayment periods.

The UK banks are preparing to defend their market against the same problems seen in the US sub-prime market.

Will the US situation hit the UK? Boulger of mortgage broker John Charcol does not think so. ‘But it is something the regulators will be taking into account. A lot of borrowers in the US were on short term ‘teaser’ rates and suffered payment shock when they moved to the standard rate.’

This is something that many UK consumers are being faced with. Despite the UK’s belief that their market is immune, there are parallels between the markets.

‘In the UK it is looking more and more likely that the Bank Base Rate will peak at 5.25%. I would put it at a 50-50 chance. Even if the economy does suffer because of what is happening in the US, we will be less susceptible to a downturn as we have lower exports to the States.

‘In addition we don’t have the same high proportion of sub-prime borrowers on 100% home loans. But if there is any tightening of lending criteria it is going to happen in the sub-prime and adverse markets,’ Boulger says.

Boulger believes that ‘the lenders have found that credit scoring is a very efficient predictor of those borrowers who will default,’ Boulger says. ‘You can never be certain, but I don’t think in the short-term what is happening in the US will affect lending criteria here.’

This is dividing the market into two segments, those who will strengthen the market by investing in property to build wealth, and those who will undermined it by borrowing mortgages which they cannot repay.

The number of homeowner loans, mortgages, that were approved in December 2006, was down to 113,000 approvals from 129,000 in November.

Alone, these figures may be interpreted as evidence that the property market is about to slow, except for the fact that demand still outstrips supply, especially in the area of buy-to-let, and eco-friendly homes.

The Nationwide building society said that house price growth slowed in January, following recent interest rate rises. However, it still grew 1.8 per cent, maintaining an annual 10 per cent increase.

However, people who are anticipating putting their home on the market are still enjoying a ‘seller’s market.’  December is traditionally a quiet month for house buying..

However, approvals are regarded as an important indicator of short-term trends in the housing market. The market expected a short term drop after the Bank of England increased interest rates four times in approximately six months.

Investors are not worried. They still point to the fact that interest rates are still far below historical numbers, and that they are still below the ‘wealth building’ break-off point of six percent.

At £10.6bn the money lent in the form of homeowner loans during December was another record, even though the banks approved less loans, reflecting the strong rise in house prices in the past few months.

The investors are not worried. There is still plenty of room to take out a secured loan to improve a home, or prepare it for the buy-to-let market, and make a substantial profit, especially in the London areas.

If you are searching for a mortgage that is suitable for you and your needs, there is one type of mortgage that you may want to consider, a discount mortgage.  A discount mortgage is a mortgage with an interest rate where a discount is applied to the rate on the loan.  The discount is applied to the lender’s standard variable rate for a set length of time.  The length of time can vary from three months to several years.  Because it is a variable rate, the interest will rise and fall with the Bank of England’s base rate.  As the standard variable rate fluctuates up and down, so will the discounted rate.  A lender will offer you various discounts on the interest rate of the mortgage.

A discount mortgage can be beneficial if you are purchasing a home for the first time, as you can use the money that you are saving with the discounted interest rate to purchase new furniture or to help you redecorate your home.  The longer the discounted rate period is, the more you will benefit, so it would be wise to ask around to ensure you receive the best rate as well as the best discount on the mortgage.

With discount mortgages, early redemption penalties almost always apply and could extend beyond the discounted period.  This means that you could end up tied into a mortgage with uncompetitive rates once the discount on the interest rate expires and it reverts back to the lender’s standard variable rate.  If you change your mortgage during the early redemption penalty period, you will have to pay a fee that can be as much as six months repayments on the mortgage.  It will pay off to search around and compare offers from various lenders.

There are new reports that indicate there is a risk that the UK’s housing market is overvalued and heading for a “downward adjustment”, according to the International Monetary Fund (IMF).

The IMF stated that they used several indicators that suggest that the house price growth will continue to increase and that properties are “likely overvalued”.

“In light of estimates that house prices are already overvalued, this would increase the subsequent risk of an abrupt downward adjustment,” the IMF stated.

Nationwide claims that the average house price in the UK has reached £174,706 in February.  The annual house price inflation rose to 10.2 per cent.

A spokesman for the Treasury said that the economy has experienced economic growth for 58 successive quarters and that the UK continues to meet “strict” fiscal rules, according to a report in the Telegraph.

There are several intangible indicators that will have an impact on the housing market. The most prevalent indicator is the introduction of environmentally friendly homes.

The introduction of these new homes will have a direct impact on the types of homes that will continue to increase in value.  These news homes emit less emissions and fewer product waste.

Britain has already seen the introduction of eco-towns that are hailed as prototypes for future developments.  Currently, 45 councils have already instigated plans to create eco-homes.

Consumers who are interested in building wealth are looking at methods of improving their current homes, before selling them, so they will receive the bonus sale’s value of having an eco-home.

There are certain mortgages that are aimed to first time buyers.  These mortgages offer deals to first time buyers that they can benefit from.  However, anyone looking into a mortgage for the first time should look over the terms of what is being offered to ensure they are receiving the best value and a mortgage that is right for them.

One type of mortgage that is typically offered to first time buyers is a cashback mortgage.  A cashback mortgage is a mortgage where the lender will give the applicant a sum of money upon the completion of the mortgage.  This sum of money can be used by the applicant for various things, such as solicitor fees, furnishing for the new home, or other expenses involved in a new purchase.  A cashback mortgage can be extremely useful for first time buyers, as they may not have the mean to pay for these additional expenses.  However, with a cashback mortgage there are prepayment penalties that are charged by the lender should the borrower pay off the mortgage early.  These prepayment penalties can be as much as six months repayments on the loan.  Because of the prepayment penalties, a cashback mortgage will mean that the borrower will be locked in to a mortgage for a set number of years with an uncompetitive rate.

The other type of mortgage that lenders offer first time buyers is an introductory discounted rate offer.  This type of mortgage has a low fixed interest rate for a specified amount of time.  This can be beneficial for first time buyers, as the low fixed rate will ensure that the monthly repayments are constant as well as easy to manage during the start of the mortgage.  However, if you do not take advantage of the low interest rate by saving up the additional savings, you may find it difficult to meet the payments once the higher interest rate kicks in.  Be aware of what rate you will be charged once the introductory period is over, and also know when you will have to start making higher payments.  This way you can prepare yourself for when the time comes.

If you are planning on purchasing a property with the idea of renting it out to tenants, then there are a few things you will need to consider.  You will first need the financing to purchase the property, and then you will additional financing for the upkeep of the property.

When you look into financing for the property, one option to consider is buy to let mortgages.  These mortgages are available to those who wish to purchase a property with the intention of letting the property out to tenants.  Because of the increase in property value and the low interest rates that are being offered, many people are starting to invest in property, and buy to let is one form of investing.  A buy to let mortgage differs from a residential mortgage in the sense that lenders require a larger deposit on the loan, typically a minimum of 20-25% on the property value.  The lender will also look at the rent potential of the property, deciding whether or not they will offer you a mortgage based on the potential of being able to rent out the property for a reasonable price.  The interest rate on a buy to let mortgage is also slightly higher than residential mortgages.

If you are able to provide the financing for the purchase of the property, you will then need to consider if you will have enough to cover the upkeep of the property.  Although you automatically expect the rent to cover all the expenses, you will need to make sure that you will break even or profit from your property.  Additional costs you will need to consider when letting out your property include, letting agency fees, service charges, insurance, gas and electrical appliances, furnishing, decorating costs, and legal insurance.  All these costs can add up.  Owning a property and letting it to tenants, can be a big task and a financial risk if you are not careful and outweigh all your options.

If anyone is wondering whether they should borrow money to improve the cost of their home, they need to spend a little time looking at the ‘bottom figures’ of the current housing market.

More than 1,352 streets in England have an average house price of £1m-plus.  In 2000, only 322 streets had an average house or flat value in the seven-figure levels.

According to property information firm Mouseprice.com, this estimate is conservative.  It excludes streets where there have been too few sales to create an accurate average, or there are too few houses to provide an accurate record.

Every day, 15 homes in England and Wales are sold for £1m or more, according to the Land Registry. This includes three sold for more than £2m, a price with monthly mortgage repayments of £14,500.

What does this mean? Millions of people who purchased before the boom, before 2003, are sitting on a fortune.  Many people have seen their personal wealth grow be several hundred thousand pounds within less than five years.

Last year the average house price made the news when it reached £200,000.  Those homeowners who took out 40 year mortgages, and interest only homeowner loans were criticised. However, many of these people have watched their home prices grow to £300,000 in less than a year.

The most expensive place to live in London is Kensington Square. The average value of a home is £5.5m.  However, this is not the top.  Four flats are currently being sold in Hyde park for £85m each.

Despite three interest rate hikes, tightening lending criteria, and increased housing prices, the housing market has grown for the twelfth month in a row.  The market has slowed, but it is far from ready to make a turn around.

The average cost of a home gained a seasonally adjusted 0.7 percent to £174,706 from January, when it rose 0.3 percent, according to Britain’s third-biggest mortgage lender. This means prices will have increased 10.2 percent from a year ago.

Today’s report and data from rival home-loan bank HBOS Plc suggest that a shortage of homes is driving increases in U.K. property values.

“Supply issues are keeping an upward pressure on prices,'’ Fionnuala Earley, group economist at Swindon, England-based Nationwide, said in a statement. “House-price inflation will remain firm for a while longer.”

Interest-rate futures show that traders expect the central bank to increase interest rates a quarter point from the current 5.25 percent in March to 5.56 percent, and we may see another increase in June to 5.67 percent.

Research group Hometrack Plc said on Feb. 26, 2007 that U.K. house-price inflation grew at the fastest pace in more than three years driven by a shortage of homes. Prices rebounded in January, rising 1.3 percent, says HBOS. The bank expects to release its report for February next week.

This is good news for people who are trying to apply for homeowner loans, or those who are considering whether borrowing a home renovation loan, will be profitable in the long run.

Despite the fact that banks are getting tough on lending criteria, they must either loosen up in the coming months, or watch consumers turn to other venues for homeowner loans.

Millions of Brits are now deep in debt and not ashamed of owing money. In fact, it is more of a stigma to rent and remain out of debt, or even build wealth, than it is to be hopelessly in debt and forced into bankruptcy.

Debt is now the norm in the UK. Teenagers start to build debt while still at school, and not on student loans, but on clothing and luxury items.

College students owe an average of £28,000.

Married couples owe their combined wages for four to five years to come. In many households, this debt excludes the mortgage.

The current figures claim that the UK personal debt levels increases £1,950,000 every 3.85 minutes according to Credit Action, a national money education charity.

“Our passion is to help people stay in control, rather than let money control them and disrupt their lives through over indebtedness,” says a spokesperson.

A Conservative Party poll suggested that as many as 9 million people are struggling to cope with serious debt problems. However, the Bank of England counters by claiming that 53 per cent of the people they polled expect to clear their debts by the end of 2007, excluding their mortgages.

This is hard for some watchdog groups to believe.  Currently, there are more credit cards than people.  APACS states that, in 2005, there were 74.6 million credit and charge cards compared with 60 million people.

The Financial Services Authority said that almost a third of all teens and young adults between 16-24 years old cannot manage a weekly budget.

The Authority, a statutory body set up under the Financial Services and Markets Act, said that 94 percent of all 16-year-olds believe it is important to know how to manage money, but only 53 percent are taught how to do so.