House price growth has fallen below cash savings accounts, making rent and sale an attractive proposition for homeowners.
The latest figures from the Nationwide building society show that house price growth has fallen to below five per cent a year – meaning that cash in a savings account has grown faster than house prices throughout 2007 and making rent and sale an attractive proposition for homeowners.
The Nationwide's monthly survey showed that house prices were 0.5 per cent lower in December than in November, the second month in a row that prices had fallen. Annual house price inflation fell from 6.9 per cent in November – higher than any savings account – from a double-digit high of 11.1 per cent in June.
Risk makes rent and sale appealing
Financial advice website thisismoney.co.uk commented on the building society's survey, saying, "It means that cash savings accounts, with no risk of losing money, represent a better return on invested capital." And for many people, toying with the idea of rent and sale rather than carrying on paying a mortgage through a predicted slump in the housing market, it will be the risk element that makes having the cash in the bank more attractive.
People who decide to rent and put their houses up for sale can pay off the balance of their mortgages and, if they have equity in their property, bank the rest of the sale proceeds. As was proved by the government's announcements after the run on the Northern Rock in September, money in the bank is guaranteed safe and will not lose its value.
Rent and sale would safeguard investment in a housing crash
In contrast, a house worth £200,000 today might only be worth £180,000 by the end of 2008 if predictions of a ten per cent fall in house prices prove to be accurate. Selling up, setting up a rent and sale proceeds safely in the bank would prove a safer way to guard savings were that to happen.
Even if the 4.8 per cent growth continues, a £200,000 house would be worth £209,600. The same £200,000, if invested in one of the higher paying savings accounts at current interest rates, would be worth £110,400 after tax on the interest payments (and slightly more if you took up your Cash ISA allocation for this year and next). This makes rent and sale especially attractive to people who have paid off their mortgages.
Rent and sale can be cheaper than mortgage payments
For people who have a mortgage outstanding, the return wouldn't be as high – but could be negated by the fact that there would be no mortgage interest to pay over the year (cash savings accounts pay more in interest than some mortgage companies charge, though) – and by the absence of risk.
And for those who don't want to move, a rent and sale deal where you sell your house but keep living in it and paying rent might be the best way to safeguard cash during the property slowdown. The money that normally goes on the mortgage would more than cover the rent, meaning the proceeds from the house sale can sit in the bank earning interest.
Rent and Sale with rentandsaleltd.co.uk
If you're caught in a financial house-trap, rentandsaleltd.co.uk can throw you a life-line. Rentandsaleltd.co.uk offers a sell and rent back scheme for those who like living where they are and want to maintain stability but are facing mortgage arrears, repossession, bankruptcy and debt or concerned financial meltdown is looming. The rent and sale scheme is an alternative to selling up and moving, allowing you to stay put and find financial solutions. Rentandsaleltd.co.uk will buy your home and allow you to continue living in it as a tenant. Find out more, call Rent and Sale Ltd. today on: 08000 255 920