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Falling House Prices Hit the Debtor and the Company Ledger
Following on from our article earlier in the month – which warned that the housing market could take a downward turn – Nationwide, the Land Registry, and IPD have all now seen evidence of falling prices. While this is good news for those attempting to step on to the first rung of the property ladder, even more consumers could cry, “Please help clear my debt!”
The recent problems in the economy meant many banks tightened up their policies on lending, making it harder to remortgage or take out loan with them. Those with poor credit are finding that fewer mortgages and credit card applications are being approved. More property owners are expected default on their mortgages as banks and other providers withhold credit and consumers struggle to pay off debts.
With consumers getting less credit, growth and spending could slow down to an alarming rate hence the increasing clamour for another cut in the interest rate in February. A reduction in interest rates could lead to less expensive mortgage repayments for those property owners not on a fixed-rate mortgage.
The latest statistics from Nationwide show that property prices dropped for the third consecutive month, as the average cost of a home fell 0.1 per cent to £180,473. This data is backed up by a fall in the annual rate of price growth to its lowest level since the end of 2005 and a quarterly comparison on the rate of price growth, which is down 1.2 per cent since December to -0.3 per cent.
The Land Registry saw a decrease in the property price inflation in England and Wales in the last month of 2007 as well as the average cost of a home coming down by 0.4 per cent to £184,469. Property values did go up in three regions (London, the northeast and the east of England) but a large drop was observed in the East Midlands. The Land Registry found that the average value of a home in the capital was nearly double that for England and Wales.
It’s not just individual home owners who have been affected though. IPD, performance analysts for the real estate industry, have recorded an 8.7 per cent reduction in the amount of investment in commercial premises in its UK Quarterly Property Index. Some commercial property funds have begun to implement time delays to prevent all of their investors from removing capital at the same time, since such properties take so long to trade.
Remortgage News posted on 31 January 2008
