Simon Read: Falling house prices do not mean it is time to panic

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Homeowners were shocked on Thursday by the biggest monthly fall in house prices since records began. The Halifax reported that prices slumped 3.6 per cent from August to September – meaning the value of the average property fell by £6,000 over the month.

The price of a typical house dropped from £168,124 to £162,096, and the news led many to predict a double dip in the housing market. I'm not sure that there'll be a further slump in the market. Instead I suspect house prices will remain relatively flat over the next year or two.

The key question to ask yourself is "Can I afford my mortgage repayments?" If house prices fall, the fear is that many people could slip into negative equity, owing more than their property is worth.

The last time that happened, in the early 1990s, some two million people slipped into negative equity, and many ended up losing their homes. But the two don't go hand in hand. Back then, interest rates ended up in double figures, leaving many people unable to afford their mortgage and unable to sell their home to get out of it because of the negative equity.

This time – at the moment at least – mortgages should be much more affordable, with interest rates being kept at a record low of 0.5 per cent by the Bank of England on Thursday. But with many people still benefiting from low standard variable rates, it's clearly wise to think about protecting yourself against potential future rate increases now.

Most experts are predicting a rate increase won't happen until the spring, but a 1 per cent rise then could have a dramatic impact on monthly mortgage costs. Anyone with a £150,000 mortgage on a Nationwide standard variable rate of 2.5 per cent, for instance, would see repayments jump by £125 a month.

Preparing for an increase now by either making overpayments on your mortgage or by saving extra to cover future payments could help to make a potential rate shock next year easier to bear. Alternatively there is also a novel option launched earlier this year of taking out an insurance policy to effectively cap your mortgage, which could prove a cost-effective solution. I'll look in more detail next week into tactics to reduce worries about rate increases.

The collapse of the foreign currency company Crown Currency Exchange on Monday left 13,000 around £20m out of pocket. The administrator warned that they may only get a tenth of their cash back, and even then have to wait until next year for it.

While it's a tragedy for those hit by the company's crash, the signs were there that Crown Currency wasn't operating in a sustainable way as the rates it offered to the public often seemed to be much better than foreign exchange market prices. Customers were encouraged to pre-book foreign currency, often months in advance. But critics accused the company of selling currency above market rate to get business, but not actually buying it.

That does sound a risky approach and I've seen emails from earlier this year from rival firm Currency Index warning the Financial Services Authority and HM Revenue & Customs that Crown could be speculating with customers' money. We don't know what went wrong.

But as Crown wasn't regulated, there is no comeback for its victims. People should be fully protected from companies they hand their cash over to. That means ensuring all currency companies are properly regulated.

Couples should talk about risk

Failing to make pension provision for partners could mean losing all or part of a private pension income, the Prudential warns. The insurer says 52 per cent of adults aged 40 or older who are not yet retired are at risk of losing retirement income because they are failing to make pension provision for each other. It means the pension could be lost if one partner dies.

"Talking about money can be difficult enough for many couples but clearly talking about death and money is a step too far for millions," says Vince Smith-Hughes, head of pensions development at Prudential.

"But it's time to speak up. Losing some or all of your income in retirement is a terrible risk to take and couples should think carefully about what happens in the event of one partner's death, and seek advice to ensure this eventuality is taken into account."

One solution, for instance, is to buy a joint life annuity on retirement which will pay an income to a spouse or dependant after your death.

s.read@independent.co.uk

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