Money Nut

Gordon Brown has decided that homeowners, who are struggling to meet their repayments on their mortgage, should be given a payment holiday - in the hope that it will help cut the number of repossessions we are seeing lately.

The scheme will see borrowers differ interest payments for two years - the government will be paying the charges. The plan covers mortgages up to £400,000 and will hopefully help up to 70% of the mortgage market.

The price of the average UK home has fallen by 15% in the last 12 months - equating to £30,000 per home in the UK.

This was announced before the Bank of England announced their massive 1.5% interest rate cut. Just when the cut will be reflected in the property and mortgage markets is yet to be seen.

One of the main reasons for the fall in house prices is the lack of affordable finance for first time buyers - some of the most important customers for the market. If mortgage rates are reduced along with the base rate, it could have a positive impact on the market. House prices are still falling, so the sooner the mortgage market can be rebooted, the better.

The housing crash is set to see millions of homeowners plunge into negative equity over the next couple of years, with the figure expected to hit 2m in 2010. Figures confirm that in excess of 60,000 homeowners are moving into negative equity each month.

The problem with negative equity is that once the slide has began, it gets worse very quickly and can be difficult to crawl out of. Each homeowner that moves into negative equity has the choice of selling up and taking a loss, or staying put and try to bail themselves out of trouble. If people do decide to downgrade their homes, it will itself have a drag on any possible property price rise when the economy does pick up.

Negative equity is a nightmare for homeowner's and the additional funding required can require a total re-budget - in turn having an effect on the speed of economic revival in the UK.

Many Brits are seeking out an alternative to buying and renting, and often are settling on staying in a hotel.

Nationwide have revealed that house prices have fallen by over 12% in a year, while rent is also on the up due to the increase in demand. Hotels.com have said that the average price of one night in a hotel is £106 - out of the price range of most.

It's not ideal long-term, but it is an alternative that many people may decide to look into, particularly, for example, to bridge the gap between homes.

The rental market isn't just being overpowered by student properties at the moment. Due to the current economy, swish houses are being put forward as well.

The current slump is forcing many people to become tenants or landlords. Demand from tenants seems to be strongest in the North West of England and new instructions from landlords seem to be highest in the Midlands and Wales.

It's also been predicted that this trend is likely to continue.

Many mortgage advisers are giving their customers poor advice, according to research by Which?

Researchers posed as customers at 50 banks, independent advisors and estate agents. They found that 4 gave acceptable advice, with 41 failing to provide at least one key piece of information, which included:

• Saying whether their services included advice as well as information
• Showing the customers an initial disclosure document
• Giving the customer a key facts illustration.

They also said that the advisors seems to be more interested in flogging insurance. Out of the 50, 24 were banks or building societies, 13 were estate agents and 13 were independent advisors.