Thrifty Loans

Credit reference agency Experian has issued a report forecasting that half of the country will see house price falls in the next 18 months as the effects of the credit crunch continue to bite.

Mortgage lenders are being much more stringent about what they will lend and to whom, and this and the credit squeeze will take buyers out of the market. Another factor is that there is a general concern about what effect the credit crunch is going to have on property – making the fears almost a self-fulfilling prophecy.

Experian expects to see falls in property prices in half the regions by the middle of 2009. The biggest fall, it believes, will be in the West Midlands – a loss of 4%. The East Midlands will see a fall of 3.7%, the South West 2.8%, and Northern Ireland a 2% fall. The province has seen an amazing boom in property prices in the last two years, so this will be a minor correction. In the East of England a 0.7% fall is expected and a 0.4% fall in the South East.

Experian spokesman Andrew Burrell said: “Five UK interest rate hikes since mid-2006 were already hitting consumer demand and global developments tighten the squeeze. The UK economy and housing market will become direct casualties of the current worldwide credit crunch.”

Experian also expected economic growth to slip back from 3.1% this year to 2.1% next year. Burrell said: “The downturn in consumer demand is more abrupt, with demand growing by less than 2% year-on-year. Only significant reductions in interest rates bring an upturn from 2009. We expect the UK housing market to suffer over the next two years. House prices are forecast to record the lowest annual increase since the mid-1990s, while repossessions are also set to reach 15 year highs.”

Experian still expects property price growth in London (6%), Scotland (7.7%) and Wales (3%). Smaller rises should also be seen in the north East, Yorkshire and the North West, but these areas might get dragged down if the general situation in the country worsens

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