What May Bring an End to the Housing Boom in the UK.

What May Cause House Prices to Fall in the UK?

1. An increase in interest rate. Interest rates have risen 4 times since last summer. Future interest rate increases are predicted. Quite often, it can take several months for interest rate rises to have an impact on consumer spending. Therefore, increasingly these interest rate rises will start to impact upon consumer spending.

Rising interest rates will have a very significant impact in the UK because:

• High levels of personal consumer debt.
• Mortgage Payments account for an increasingly high % of people's personal disposable income. This is in response to rising house prices and a wider range of more generous loans.
• Most UK homeowners have variable mortgages, rather than fixed rate mortgages.

2. Fall in confidence.

If people no longer expect house prices to rise, and start to fear they may fall then demand will fall. This is particularly important for buy to let investors and other speculative buyers.

3. Increase in numbers of First Time Buyers who cannot afford a mortgage.

Despite more flexible lending by mortgage lenders, many first time buyers find they are unable to get a sufficiently high mortgage to get on the property ladder.

4. Renting is becoming more attractive


5. Lower Economic Growth. Low wage growth will reduce affordability and confidence.


6. Slowdown in immigration and growth in number of households.

See also:

• Why UK Housing Market is subject to Boom and Bust
• House Price Collapse - Is it Likely?
• Will House Prices Ever Fall?