Global warming may cool overseas market

Upon my return from a recent skiing holiday in Andorra - yes, there was some snow and no, I didn\'t break any bones - I got thinking about overseas investments.

There have been a few reports released recently about how people who can’t afford to get on the property ladder in the UK should think about buying abroad where it is cheaper.

Andorra seems to be cashing in on this trend, with new developments all over the country compared with when I was last there, in 2003.

I can vouch for the fact that construction is going strong as our chalet backed onto a building site – what fun.

I didn’t get a chance to check out prices but I’m sure they’re more affordable than London or Edinburgh, for example.

But Conti Financial Services is adamant that potential home buyers should do their homework before letting their hearts rule their heads when buying property abroad.

Last year, it had a record number of enquiries but also its fair share of horror stories in which overseas home buyers had their fingers burned.

Until this season, buying a second home in a ski resort in the Alps or Pyrenees probably seemed like a great idea. And Andorra may be particularly attractive because it’s a duty-free area.

But the relative lack of snow this year brought home to me the risk of buying property somewhere like that, as global warming seems to be becoming more of a reality.

The temperature on the first day in Andorra was unnaturally high for this time of year and snow was thin on the ground at the start of the week.

Anyone who has brought property over there must be a little worried about what will happen if the snow dries up completely in the years to come. There’s not that much to do in a ski resort without snow. On a brighter note, lenders seem to be cutting fixed rates in the UK market.

For example, last week Abbey, GMAC-RFC, Alliance & Leicester and Bank of Scotland have all announced reductions in two-year fixes on the back of falling swap rates.

This came as the Council of Mortgage Lenders released figures showing a record number of first-time buyers opted for fixed rate deals in January because of fears about more rate increases.

The data reveals that 85% of first-time buyers chose fixed rate deals in January – the highest figure on record – and just over 70% of home movers also decided on fixed-rate deals.

This is a welcome sign that an increasing number of first-time buyers are locking into the payment certainty fixed rate mortgages provide, as they are the group of people who are most financially stretched and may suffer most if interest rates go up.

Overall, fixed rate mortgages accounted for 72% of all new loans in January – the highest proportion since January 2006 and up from 69% in December.

But the problem remains that many first-time buyers still don’t have deposits and have to opt for 100% deals which are virtually impossible to find with fixed rates.