House Price Update to 19 June 2009

UK House Prices Situation: Small increases reported in May

UK House Prices Forecast: Stagnation likely, further falls possible

House Price Stability Returning?

TThe last couple of months have seen both the Halifax and Nationwide house price indices reporting small rises in average house prices in some areas of the UK.

Does this mean that stability is returning to the housing market and the prices have reached a bottom?

Some companies would have us believe that this is true. House builder Taylor Wimpey, for example, has reported a 73% increase in forward orders since the end of 2008. It also reports a fall in cancellations. However, this must be looked at in context – orders were at record lows at the end of 2008 and cancellations were probably at their highest levels ever.

Is the Mortgage Market Holding Back House Prices?

One popular theory amongst estate agents and others people involved in the property market is that restricted mortgage lending is holding back growth in house prices.

The problem, in reality, is that mortgage lending got out of hand and funded excessive house prices – if 90%-100% mortgage loans hadn’t existed, house price rises would have been slowed sooner and might not have fallen so much. Now that mortgage lending is more sensible again, there is a misbalance between available mortgages and house prices.

House prices will have to fall until they are inline with mortgage lending. In the long term this is a good thing as first time buyers will be able to afford to enter the housing market again. In the short term this means that many people will struggle to remortgage their homes and may well be in negative equity for a period of time.

Read about UK House Price indexes / key statistics that track the ups and downs of house prices

Read our take on the Credit Crisis the effect on UK House Prices and Mortgages. A Special Report

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