Unfortunately, with the cooling of the real estate market, equity mortgages have taken a hit as well. While there are still those who insist that equity mortgages are the perfect financial instrument for those hoping to put themselves into a mortgage that is affordable and suitable for their current needs, experts tend to lean away from equity mortgages in times of fiscal crisis or recession.

Naturally, most individuals are weary of discussing recessions and credit crunches, but the harsh reality is that equity mortgages are not performing as well as many had hoped in a downward market. Despite this, many still insist that equity mortgages are a safe financial vehicle and continue to make this specific type of investment.

“This also has the benefit of allowing émigrés the opportunity to decide which area of the new country they want to live in, prior to making a commitment to purchase. Also, if for some reason things don’t work out as expected and émigrés want to return home, it is simpler to return to the UK and avoid all the purchase costs such as stamp duty and estate agents costs, of buying a new home,” stated Mark Bodega, director at HiFX.

“For a rented property to ‘pay for itself’ then émigrés need to secure a rental income of at least 1.25 times the mortgage payments; however some deals allow as little as 1.1 times. They should also change from a residential to a buy-to-let mortgage, which is fairly straightforward as long as you have 25 per cent equity in the property, although some lenders will allow as little as 15 per cent on some products.”

Nick Poyntz-Wright, CEO of Skandia UK, explained: “Private investors have accumulated significant amounts of equity in buy-to-let-properties after a long period of strong growth in home and flat values.

“Higher mortgage rates and falling property prices will cause investors to reconsider their exposure to residential property and many will choose a more diversified approach”, he added. “With inflation rising, investors realise the need for strategies that preserve their wealth.”

Chandrajit Bhattacharya, mortgage strategist at Credit Suisse, said: “Refinancing, that avenue is almost shut down. If distressed borrowers can’t sell, the only thing they can do is default.”

Grant Bailey, analyst at Fitch Ratings, said: “In an environment of falling home prices and limited refinancing opportunities, loans with these characteristics have shown a high propensity to default.”

Don Brownstein, chief executive of Structured Portfolio Management, a hedge fund said: “Prime jumbo borrowers traditionally had more equity in their homes but, in many areas with high concentrations of jumbo borrowers, home prices have fallen so far that much of that equity has been eroded, both reducing borrowers’ incentives to make payments and their refinancing options.”

“Savings are the key,” said a ThinkMoney spokesperson. “Falling house prices means that equity tied up in the value of your home is decreasing, so it’s wise to try and counteract that by saving money where possible. This also acts as a buffer if you find the interest on your mortgage payments going up in the next few years, which is quite possible. Without savings to fall back on, mortgage payments could become simply too expensive for poorer families, and that brings the possibility of falling into debt – especially with other costs of living rising so quickly too.

“Likewise, it’s important to keep an eye on spending and make sure unnecessary purchases are kept to a minimum. Avoid taking out consumer finance loans on expensive goods, as they can become a big financial burden when things get tight,” she continued. “In fact, avoiding any form of personal loans or credit is the best defence against getting into debt.”

Miles Shipside, commercial director at Rightmove, said: “Sellers are finally recognising that they need to undercut their rivals from the outset, rather than testing the market and dropping prices later.

“Whilst this £4,000 reduction is on top of a £3,000 drop last month, sellers’ pricing needs to be at the level where deals are being done. It could be a lot better outcome to price aggressively and sell now, rather than accept a bigger reduction later as prices continue to fall.”

Shipside concluded, “The ‘doom and gloom’ attitude should be about the drastically low level of sales which affects the wider economy, not about falling prices. Unless you are trading down, inheriting or in danger of negative equity, the effect of falling prices is neutral or indeed good for some.”

Former Prime Minister Sir John Major stated, “I think we’re going to be very close to recession if not technically in recession - two quarters of negative growth. The Government’s mantra certainly is that this is an imported problem and that is partly true. What is equally true, I’m afraid, is because of the actions the Government themselves have taken over the last 10 years or so, we are not in a very good position to deal with that problem.”

Roger Bootle, the managing director of Capital Economics, said: “This shows the extent to which the whole financial and political establishment has not realised how bad the situation is, and exactly the same thing is true in the UK as in the US.”

“Operation Malicious Mortgage highlights the strong enforcement response undertaken by the Department of Justice and its law enforcement partners to combat the threat mortgage fraud poses to the U.S. housing worldwide credit markets,” the FBI said in a press release.

“Mortgage fraud and related securities fraud pose a significant threat to our economy, to the stability of our nation’s housing market and to the peace of mind of millions of American homeowners,” said Deputy Attorney General Mark R. Filip. “Operation Malicious Mortgage and our other mortgage-related enforcement actions demonstrate the Justice Department’s commitment and determination to combat these criminal schemes, hold their perpetrators accountable and help restore stability and confidence in our housing and credit markets.”

“With the short and medium term economic outlook not looking too promising, homeowners are less likely to move home due to falling property values and banks lowering the maximum loan to values available. There is now new scope for a borrower to possibly take a more prudent approach, to look past previously popular two-year deals and look for longer term stability,” stated Darren Cook, an analyst with MoneyFacts.

He added, “There is little difference between the initial monthly repayments of these two deals and, in my view, we have now seen the end of ‘loss leading’ product pricing within the two-year market.”