What is the impact of house prices on my ability to borrow money?

If you would like to borrow money on an unsecured basis (without using your house as security), the bank will rely on a credit scoring technique to determine your ability to repay the loan. The credit scoring technique will use your credit report to verify your details and make a determination if you can repay the loan. House prices will not have a major impact on your ability to borrow money on an unsecured basis.

If you have a clean credit record and would like to borrow money on a secured basis, most lenders will take a charge over your house but will still base their lending decision on your credit score. If you have a history of credit problems, the lender will depend as much on the value of your home as your credit score in making a lending decision. As a result, if you have an adverse credit history and own your home, many lenders will lend you more money if your home is more valuable. Specifically, the lender will be focused on the amount of positive equity in your home. If the value of your property is greater than the mortgage outstanding against your home, then you are in positive equity.

The more positive equity that you have, the more money you will be able to borrow. In an environment of rising house prices, the value of your home will constantly be increasing and thus creating positive equity for you to borrow against. This equity can be released through a secured personal loan for home improvements, a holiday, to start a business, or anything else you would like.

A situation of declining house prices can create negative equity - when the mortgage outstanding on a house is greater than the value of the property. Negative equity will make it difficult to borrow money on a secured basis.

The following table of house price movements should provide you with some guidance on the growth of equity in your home but remember that a lender will require a valuation of your specific home. Regional trends are no guarantee that your specific home has increased in value. For individual advice, you should contact a real estate agent or chartered surveyor in your area.

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Seasonally adjusted figures for the 3rd Quarter 2002
Region	Average Price	Quarterly Change	Annual Change
Scotland	£68,648	3.0%	7.3%
North	£68,010	1.8%	15.7%
Northern Ireland	£79,907	1.7%	4.6%
Yorkshire & Humberside	£71,334	7.3%	18.6%
Northwest	£79,205	8.9%	20.8%
Wales	£76,359	0.7%	10.0%
West Midlands	£104,536	5.4%	20.6%
East Midlands	£103,653	13.9%	37.6%
East Anglia	£119,932	2.6%	20.1%
Greater London	£206,425	5.1%	17.9%
Southeast	£174,126	3.5%	20.2%
Southwest	£140,940	9.4%	25.8%
Source: Halifax

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