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Thank you Darling

18th March 2008 | back to article listings BACK    print this article PRINT

While reports of calamity on Wall Street hit the papers and experts declare imminent disaster for the financial market, homeowners may begin to ask whether their property investment is doomed to failure and whether 2008 will have a happy ending.

But among the negative forecasts about rising mortgage rates and the pain of being a first-time buyer, Alistair Darling may have injected a light at the end of the tunnel.

Last week's Budget announcement saw the introduction of the Housing Finance Review, which mapped out the possibility for an insurance based on house price movements.

Under the proposed changes, an insurance against falling house prices would use a house price index to pay out the value of a home if for any reason it declined by more than the value of an equivalent property.

In the face of adversity, this appears to be a positive move by the man who has faced criticism for failing to support first-time buyers in his inaugural Budget.

And while it is encouraging that the Treasury is looking into the possibility of these changes, even more heartening is the idea that insurance companies are slowly beginning to respond to the financial instability.

Soon after the Budget was announced, insurance company MarketGuard offered its cover solution for those concerned about the impact of the credit crunch and market failures.

The firm will introduce an insurance product to cover individuals against increases in their mortgage payments that may occur as a result of rises in the Bank of England base rate. This will be the first of its kind and other companies may well follow suit.

Although mortgage experts have advised taking out a fixed-rate mortgage in times of economic uncertainty, millions of people could still benefit from this new innovation in the house insurance market.

Chris Taylor, chief executive officer of MarketGuard, said the company estimates there are approximately approaching seven million variable rate mortgages in the UK, adding: "Our research shows that there is a desire amongst this group to have available a product such as stand-alone interest rate insurance, which will give them payment stability without tying them to lenders or products."

And the final ray of sunshine for property investors is that more and more people who may once have been on the house-buying market are now opting for a rented property.

This has led to growing optimism about the potential for success in the UK's buy-to-let market.

So the moral of the story? With the help of insurance innovation and perhaps even some changes by the Treasury, homeowners will be able to cope in the face of adversity and have their happy ending.

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