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Statistics See House Prices Fall To Earth in 2008?
2008 is proving difficult to predict in the housing market since the Bank of England’s three-monthly Credit Conditions Survey has said that more home owners are likely to default on mortgage payments over the next quarter and that the amount of approved new mortgages fell again in November. Most lenders believe this may lead to the cost of housing only rising a little or that prices will remain fairly constant, but some believe that the value of property may actually drop.
The news means that it could make it harder to get out of debt in the short term but could herald another cut in the interest rate, which would help people clear debt easier.
According to the Bank of England merely 83,000 new mortgages were approved in the month of November, falling from 89,000 in October. It’s been almost three years since that few new mortgages have been recorded. The recent credit crunch has led to many banks tightening up their lending policies, making it harder to obtain loans and remortgage. With more people getting less credit, consumer spending could show signs of slowing next year and could lead to calls for another cut in the interest rate.
Over the next quarter the Bank of England expects more home owners to default on their mortgages as banks and other providers continue to feel the pinch of the credit crisis. This has meant it is far harder for people to get either secured or unsecured loans to make their money go further. Again, a cut in the interest rate may be seen as the solution. Lower interest rates can mean lower mortgage repayments for those not on fixed rate mortgages.
These statistics have suggested to some experts that house prices will continue to fall in 2008 as they did in December, for the second consecutive month. Both the Halifax and Nationwide are predicting that inflation on property prices will decrease to almost zero by the end of the year. Nationwide believe that, “lower interest rates will probably help market activity recover somewhat later in 2008, as lower house price growth restores some affordability and allows pent-up demand from first-time buyers to be released.” Scotland may still experience rising prices this year though.
Bob Pannell, the head of research at the Council of Mortgage Lenders noted, “This survey corroborates other evidence of worsening market sentiment. This may increase the chances of interest rate cuts sooner rather than later if inflation remains subdued. Borrowers should make a New Year resolution to review their finances and plan ahead if they are coming off fixed rate deals later this year.”
Remortgage News posted on 07 January 2008
