Collapse in House Prices

A dramatic graph showing how much house prices in UK are falling.

Despite a radical cut in interest rates to 3%, house prices are likely to keep falling in 2009.

Why are House prices falling so much

• Economic recession – rising unemployment increases number of home defaults. – People don’t want to buy with so much economic certainty
• The snowball effect – No one wants to buy when house prices are dropping so much. It makes sense to wait and ride out the storm
• The Credit Crunch – Banks are trying desperately to improve their balance sheets. They don’t want to lend mortages. Furthermore, with falling house prices, there is the danger of negative equity. Therefore, banks are wanting a big deposit.
• People can’t afford to buy a house.