Mortgage woes worsen
In another blow to house affordability, 11 major UK banks and building societies have cut their maximum lending amounts, a significant reversal of their previous lending practices.
[UKPRwire, Tue Jan 22 2008] A survey from the Royal Institution of Chartered Surveyors (RICS) shows that house prices across the UK fell in December at the fastest rate since 1992.
The interest rate hikes of 2007 and the tighter mortgage lending criteria being imposed by banks and building societies as a result of the credit crunch are chief factors in the prices slowdown.
The survey showed that 49.1% more surveyors reported price falls in December than those reporting a rise, compared to 40.6% in November. That was the fifth consecutive month of falling house prices.
There was also a fall in demand, with 25% more surveyors reporting a fall than a rise in new buyer enquiries. And surveyor confidence in the outlook for both house prices and volume of sales has worsened, reaching its lowest level since 1998 when this factor was first included in the survey.
The Bank of England is being urged to cut interest rates as soon as possible to encourage buyers and help stabilise the market slump.
The gloomy outlook must be seen in the context of underlying economic conditions, and these are very different from the 1990s housing recession. Continuing strong employment and a steady level of supply in the housing market are factors mitigating against a crash. While figures showed a slight rise in new instructions to sell property – the first rise in six months – Ian Perry, a spokesman for the RICS, said that “Supply would have to loosen considerably before prices experience a significant dip.”
“The housing market is in a wait and see situation”, said Lawrence Smith of Decision Homebuyers, “with potential first-time buyers waiting for a fall in interest rates, and sellers waiting for falling prices to stabilise. The pressure is on the Bank to move quickly to reduce rates and inject some sorely needed confidence into the market.”
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