The housing boom in the UK has been one of the most significant drivers of the economy in the last ten years or so. Now, however, with rising interest rates, the credit squeeze and consumer confidence falling through the floor, the decade of uninterrupted growth is about to come to a grinding halt.
There are still some good points for the market: high employment and a general lack of supply in the market should serve to drive property prices upwards, but analysts are forecasting a slowdown in demand leading to a fall in prices.
The recent crisis affecting Northern Rock will have brought home the potential seriousness of the credit crunch to the average homeowner in the UK. Activity levels are set to plummet.
Another factor has been the implementation of Home Information Packs for, firstly properties with four bedrooms and more, and from 10 September, for three bedroom properties. The number of properties on the market has fallen as a result. Although this might serve to push prices up, in fact it has just added to the depression in the market.
Mortgage rates have started to go up as a result of the credit squeeze and the failure of big banks and the Bank of England to stave off the crisis. Instead, the bill for the fallout is being passed on to the consumer. Borrowers with adverse credit histories will find themselves unable to find a mortgage or maybe priced out of the market.
Those with market surveys, such as Nationwide and Halifax have yet to predict a fall in house prices, but they do see that certain areas may be more vulnerable than others. London, for example, could have a problem if the crisis results in the loss of jobs or a cut in bonuses for City high-flyers.
A further area that could be hit is the buy-to-let market, with borrowers struggling to raise finance.
The silver lining could be that the Bank of England may cut interest rates in October, just as the US Federal Reserve has been forced to do..
Tags: credit, finance, banks <BR/>
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