Further disruption expected to hit the housing market

2nd March 2011

An increasing number of experts are predicting a fall in property prices during 2011. Around the UK prices actually grew by 6.4% on average during 2010. However, this position looks set for a reversal as further problems work their way through the economy. In the long run, organisations such as The Centre for Economics and Business Research, expect prices to rise year-on-year from 2012 onwards.

If these predictions turn out to be true then there are a number of ways this could impact on the number of individuals entering into protected trust deeds.

If you are considering entering into a trust deed agreement, and you are a homeowner, you may already be aware that an additional payment to your trust deed will be required if you have equity in your home. It is anticipated that many individuals will now have more equity in their homes as a result of last year’s price rises. In the past it is has often been necessary to re-mortgage in order to gain access to equity in homes. However, this is currently a non-option as mortgage lenders seek to reduce risk.

A home will be valued around the time the trust deed is due to commence, with equity assessed at this point. Any equity will need to be dealt with before the date the trust deed is due to terminate. It is advisable to receive, in writing, details about exactly how the equity in your property will be treated in the protected trust deed.

This written explanation should also include details as to how your home will be treated if there is no equity at the time of valuation. Some trust deed companies may seek to revalue the property later, others may offer to ‘protect the equity’ for a fee of £500, whilst some will provide this protection at no further cost.

If there is equity in your home, and you cannot envisage a way to release that sum, it may be that a protected trust deed is not appropriate to your needs. The requirement to release the equity could result in the home having to be sold, or an additional period of trust deed instalments, in order to generate an equivalent amount of cash.

If you are already in a trust deed and your position regarding equity has not yet been clarified, the prospect of price rises in the future may be a cause for concern. We highly recommend asking your trust deed provider for written confirmation of your responsibilities so you are fully aware exactly what is expected of you financially.

For any further information regarding protected trust deeds, our trust deed forum provides an invaluable source of information, support and advice from professional individuals with a wealth of specialised industry experience.

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