UK housing crisis - How is it affecting you?
October, 31, 2008
Soaring food and energy prices, failing banks and rising unemployment are making us all feel uncertain about the future. But what about the roof over your head...
The housing market, both buying and renting, has taken a fair few knocks this year. House prices are plummeting, more people face negative equity, repossessions are rising and mortgatges are still hard to come by.
How much worse can it get?
The Nationwide's latest report reveals prices have fallen by around 1.4 per cent this month. (Again, another report showing the sharpest fall since records began, this time since 1991).
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October's fall comes after 11 months of falling property prices in the UK, which means that house prices have dropped by almost 15 per cent this year - taking the value of an average UK home down by nearly £30,000 when compared to 2007.
The Telegraph says the lastest figures from the Nationwide can be translated into a pretty scary fact - people are losing more money on their home than they're earning everyday at work.
Fionnuala Earley, chief economist at Nationwide warned of a "bumpy ride ahead".
Negative Equity fears
The Bank of England recently warned that around 1.2 million households in the UK could see themselves facing negative equity if the slump in the housing market continues.
Andrew Oswald, professor of economics at Warwick University, predicts that, much like the property price boom the downturn will start in London and then spread nationwide.
Still no money to lend
Global turmoil in the financial markets means that financial institutions are worried about lending cash to one another (despite the multi-billion pound Government bailout). So they are still cutting down on lending to the public. This means, less mortgages, less homes being bought and gridlock in the housing market.
And while it may seem, on the surface, that falling house prices may benefit first-time buyers, this may not be the case.
The first-time buyers
Reuters reports that those who bought they first property in the past few years are likely to have only been able to put down a fairly small deposit. This puts them in a particularly vulnerable position.
Guide to Investing in uncertain times
Those who have held mortgages for a number of years might not escape the wrath of the credit crunch either, with existing mortgage prices also reportedly rising.
In Nationwide's report, Fionnuala Earley states that a looming recession and continuing instability in the financial sector could have "uncomfortable implications" for the housing market and will have an affect on how quickly house prices in the UK recover.
So when will house prices recover?
Predictions from the Centre for Economic and Business Research say 2013 at the least, when it says that prices will return to those witnessed last year.
Until then, it would seem that all the average UK homeowner can do is keep their head down and weather the financial storm.
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