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UK House Prices Situation: Average prices falling
UK
House Prices Forecast: Falls of 5% - 10% expected this
year
Halifax:
House Prices Fall 2.5% in March
The
latest house price survey by Halifax
has found that house prices fell by an
average of 2.5% in March, confirming that the housing
boom is well and truly over.
This
also means that house prices have finished the first quarter
of 2008 1% lower than they were at the end of March 2007.
In other words, prices are an average of 1% lower than
they were at this time last year.
Commenting
on the figures, Halifax chief economist Martin Ellis said
"Overall, we expect there to be a modest fall in
UK house prices this year. Any declines, however, should
be viewed in the context of the significant price rises
over recent years. The average UK price has risen by £120,860
during the past decade from £70,696 to £191,556;
an increase of 171%."
Ellis
makes a good point - house prices had
risen so far that they were unaffordable to a great many
people and required extremely large mortgages for many
others. This is a position also taken by other economic
observers, including the International Monetary Fund (IMF).
The IMF warned this week that UK housing was overvalued
by up to 30% and at risk of serious price falls.
Mortgage
Lenders Preparing For Bigger Falls
As
part of their regulatory responsibilities, UK mortgage
lenders are required to 'stress test' their lending arrangements.
What this means is that they must work out what would
happen in certain scenarios - for example if house prices
fell.
Until
recently, these stress test scenarios have often only
included falls of 5% - 10%. However, many lenders are
now testing their lending portfolio with much bigger house
price falls in a sign of growing anxiety about
the future of the housing market.
Speaking
to The Independent, Matthew Bullock, Chief Executive of
Norwich and Peterborough BS, admitted that they have recently
upped their model from a 5%-10% fall to a 15%-20% fall,
although he stressed that "we are not predicting
house prices will crash."
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