According to recent reports house prices in the UK have fallen for the first time in a two year period. Many experts believe that the housing market is softening as a result of lack of affordability and other issues. According to the Royal Institute of Chartered Surveyors from June to August of this year the house price index showed its first negative reading since October 2005. Affordability in the housing market has become major issue over recent months, with a number of factors affecting both consumer confidence and affordability.
Industry professionals also expect the market to continue softening as this year progresses. One official from the Royal Institute of Chartered Surveyors stated: “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.”
Interest rates have risen five times since last August, taking the base rate from 4.5% to 5.75%, which has had a serious impact on affordability issues as a result of soaring repayments. The high value of properties has also affected the ability of many consumers – particularly first time buyers – to be able to purchase a property. For the ninth month in a row the level of new enquiries with regards to purchasing property has fallen. Agreed sales on properties also fell for the third month in a row.
More recently turmoil in the mortgage and financial markets has seriously affected affordability and accessibility when it comes to mortgages. Inter-bank lending fees have rocketed, and this has resulted in many lenders hiking up their rates even further. Some have also withdrawn some mortgage products – namely those relating to sub-prime lending – as the result of a global credit crunch that has spread from the sub-prime sector in the United States.
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