No cheer in sight for housing market

HBOS, Britain’s largest mortgage lender, has revised its earlier forecast of a low single-digit drop in UK house prices to a drop of around 5% in 2008. The pessimistic outlook by HBOS was further confirmed by the latest house price index (HPI) from Halifax, which fell by 2.5% in March, the steepest rate of decline since the property slump of the early 1990s.

[ClickPress, Wed Apr 30 2008] HBOS, Britain’s largest mortgage lender, has revised its earlier forecast of a low single-digit drop in UK house prices to a drop of around 5% in 2008. The pessimistic outlook by HBOS was further confirmed by the latest house price index (HPI) from Halifax, which fell by 2.5% in March, the steepest rate of decline since the property slump of the early 1990s.

The HPI findings show that UK house prices fell by an average 1% in the first quarter of 2008 and by 4% from their peak in August 2007.

An even bleaker forecast is given by the research consultancy Capital Economics, which has also revised its expectations downwards in light of worsening conditions and the long time lags in the house buying process (and thus in reporting market trends). It says prices could fall by as much as 8% this year and by 10% next year, which, after taking into account the dip in prices in the last months of 2007, points to property prices ending the year around 20% lower than their peak in 2007.

The revised forecasts coincide with data on mortgage approvals, which fell to a record low of 35, 417 in March (the lowest level since 1997 when these statistics began to be reported), as a result of the tighter lending criteria and higher rates which banks are continuing to impose as the global credit crunch bites.

A steady fall in property values has also been reported by Nationwide, while the March survey by the Royal Institution of Chartered Surveyors (RICS) shows that confidence in the UK housing market is at its lowest level on record.

Also, there is not a great deal of confidence in the £50 billion ‘special liquidity scheme’ introduced by the Bank of England last week. While lenders welcomed the move, which should help ease mortgage funding concerns by letting banks swap mortgage securities for government bonds, they warned that this was unlikely to result in lower mortgage rates for new borrowers in the foreseeable future. And commenting on the scheme last week, Capital Economics said “we do not see today’s move preventing further house price falls".

“The combined data from the market’s March reports all point to the same thing – the gloomy outlook for Britain’s housing market just got gloomier,” said Lawrence Smith of Decision Homebuyers. “With mortgage rates rising, fewer loans being approved, and larger deposits being required, it is harder than ever for many people to get on to and move up the property ladder.”








For press enquiries, please contact Phil Rendall on 020 7099 9026
Email: phil@dhbuyers.co.uk
Web: www.decisionhomebuyers.co.uk

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Decision Homebuyers carries out daily surveys of the national media to provide up-to-date news and commentary on the UK property market.

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