Predictions of House Price Falls

The last few months have increased the likelyhood of falling house prices in the UK.

These factors could contribute to housing price fall

1.  Increase in Mortgage Rates. Many banks are increasing their interbank lending rate; this is being passed on to consumers. Therefore, there is an increasing gap between the Bank of England’s base rate and the lenders Standard Variable Rate. This makes mortgages more expensive, despite base rate cuts.
2. Reduction in Number of mortgages available. The big mortgage lenders have been reducing the number of ’subprime’ and risky mortgage products. For example, 125% mortgages have been stopped and 100% mortgages are very rare. Mortgage lenders like the Nationwide have demanded a much bigger deposit from borrowers. With a marked fall in mortgage lending the demand for housing will continue to weaken.
3. People coming to an end of Fixed Rate Mortgage Deals. Many in the UK, were benefitting from being on low fixed rate mortgage deals. However, as these 2 or 3 year deals come to an end they will have difficulty switching to a new mortgage in the more difficult climate. Some will not be able to afford the new payments and so may end up with having to sell.
4. Decline in confidence. People now expect house prices to fall rather than rise and therefore, the motivation for buy to let is lower. Some property investors may take the opportunity to sell.
5. Long Term disparity between incomes and house prices. House prices have been rising faster than incomes and therefore, there is an increasing lack of affordability amongst first time buyers.