Property market seems to be on the turn
By Chris Gilchrist 25th September
2007
Both residential and commercial property markets are slowing sharply in the UK as
higher interest rates start to bite.
The buy-to-let sector has benefited but there may be trouble in store. Both Halifax
and Nationwide reckon house prices rose on average by well under 1% in August, with
the year-on-year rate of growth declining to 9.6% (Nationwide) or 11.4% (Halifax).
The Royal Institute of Chartered Surveyors said more of its members reported price
falls than rise in prices in August, and that first-time buyer enquiries fell at
their fastest rate for three years.
Compare the best mortgage rates with our best buys
Affordability is more stretched than ever
RICS said: "Potential house buyers have become far more cautious as they wait and
see what affect interest rate rises will have on household finances.
Affordability is at its most stretched in over a decade and many will worry that
rising mortgage repayments will prove a step to far.
The market will soften further, going into the autumn, reducing some impetus from
those that have been chasing a rapidly moving target. HIPS have reduced the number
of four bedroom family properties coming onto the market, making family homes even
more difficult to purchase.”
Paying your lender's SVR? Re-mortgage and save thousands
Lending slowdown
The Council of Mortgage Lenders reported a 6% drop in lending in August, while RICS
remarked on a 32% rise in repossessions in the second quarter of 2007. It predicted
repossessions could rise by a further 50% to 45,000 in 2008. A significant number
of these are buy-to-let properties where landlords are throwing in the towel as
a result of rising mortgage interest rates.
Though RICS also reported a rise in rents over the summer, this was mainly due to
the fall in first-time buyer activity, and with many landlords paying more in interest
than they get in rent, it's probable there is more pain ahead in this sector.
We've remarked on
the HIP factor and the risk that the roll out of HIPs could
slow the market as people hold their property off the market.
Compare the best mortgage rates with our best buys
Refinancing could get tougher
The elimination of Northern Rock as a mortgage lender is likely to make refinancing
tougher. Rock accounted for over 15% of new mortgage lending this year, and other
lenders will probably use the reduction in competitive pressure to jack up their
rates.
It's likely that house prices will see their first monthly fall in the next few
months, and at some time in 2008, for the first time since 2000, we'll see a year-on-year
decline in average prices.
For long-term homeowners, this is of no great importance, but it will be surprising
if we don't soon see a lot more highly geared BTL investors heading for the exit.
Paying your lender's SVR? Re-mortgage and save thousands
Article produced by EveryInvestor.co.uk
