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There has been much speculation in the media recently about the short term future of the housing market. Many observers have been predicting huge reductions in valuations of properties over the next twelve months and several comparisons have been made with the crash in the housing Market of the early nineties. This in itself has fuelled concerns for many people who are considering either moving home or buying for the first time and confidence is generally low for anyone about to take out any type of home loan.

However, when we consider the reasons for previous property crashes and the economic circumstances at the time, it seems likely that the present housing market will not see the same level of reduction as previously.

The latest statistics from the Halifax shows that, generally, house prices fell by 2.5% in March and that they were overall 1% lower for the first quarter of this year compared with the final quarter of last year. Although these figures show a decrease in property values across the market, there have been large variations from region to region, with some areas actually showing an increase in values, whilst, others such as Wales and the West Midlands have seen above average reductions (although these areas had previously enjoyed above average growth).

Although loan and mortgage companies are suffering at the present time, there are many positive factors to support the property market. Employment levels for individuals is at a record high, inflation is at a low level which in turn keeps interest rates low. Many of us remember the early nineties when inflation was running at 10% and interest rates reached up to 15%. Currently the Bank of England base interest rate is set at 5% and is likely to reduce further over the course of the year. Also there is still a significant shortage of housing and Government targets for new homes are likely to fall short of requirements. People will always need somewhere to live and the demand for homes remains high.

Overall, the latest predictions suggest a slight reduction in house prices of less than 10% over the next twelve months, but with people generally having lower loans on their properties against the value of their homes, the equity ratio looks strong, which should stop the potential problem of negative equity as we saw in the early nineties. On average, house prices have risen by 171% over the last decade and what we are currently experiencing is hopefully nothing more than a price correction rather than a crash.

The Bank of England issued its six monthly financial stability review last week and stated as part of the report that we had reached the low point with regard to the recent credit crunch and that we should see things starting to improve in the near future. The report also stated that part of the reason for the current situation within the economy is due to low consumer confidence in both the financial and housing markets and this negative attitude is actually making matters worse.

The Bank also acknowledged that although the worst of the slump is perhaps over, it is likely to be a long time before any confidence returns and we start to see an improvement in the loan and mortgage markets.

In the mean time many of those people who are currently struggling with their finances are likely to continue in a state of financial hardship, particularly those individuals with a less than perfect credit rating, as restrictions applied by lending institutions remain in place and seem unlikely to be lifted in the foreseeable future, especially in the sub-prime sector of the market.

Anyone who has applied for any type of loan or mortgage recently will almost certainly have noticed a much tougher line from the lender with regard to lending criteria. The Banks and other lending institutions appear to have learned a valuable lesson from their recent exposure to the sub-prime loan and mortgage market and it seems unlikely that they will return to the generous (some might say irresponsible) lending criteria of the recent past. 

It would be nice to think that the current problems with the downturn in the economy are about to be reversed, but with major lending institutions closing their doors to new loan business and making huge redundancies, high street banks forcing rights issues with their shareholders and the housing market remaining dormant, it seems it will still be some time before we see the light at the end of the tunnel.

As access to debt consolidation loans and other forms of mainstream credit continues to dry up throughout the course of the year, Bankruptcy and IVA cases are set to shoot up in numbers.

According to one expert, thousands upon thousands of British consumers may become vulnerable to the grasp of Bankruptcy, as record numbers of loans sought after for the purposes of controlling personal debts, are refused. 

There are actually very few options remaining for individuals who are seeking additional funds to control their fixed costs, and after the last chance saloon of friends and family are exhausted, a comparatively large number of Brits will have little in the way of realistic alternatives to voluntary insolvency or Bankruptcy.

An impartial expert commented that in his opinion it was unlikely for Bankruptcy numbers to increase at the rate that this specific piece of information hints at, however, there is no getting away from the fact that a lot of people will almost certainly become very seriously hindered by the national credit draught. It is very possible that Bankruptcy and Insolvency numbers will surpass those recorded in 2007 (which were high in themselves), although to what degree would be extremely hard to determine at this early stage.

The overall available funding in which banks and other lending institutions draw their loan and mortgage products from, has become so limited that borrowers are essentially competing against each other to obtain the finance that they require.

According to a reputable financial site, UK loan lenders have now started to look beyond the average criteria in which they would have ordinarily approved a loan application, opting instead to skim off the cream of their prospective applicant pool.

What this means is that even though a borrower may in essence have a good past history of credit, there is still a faint chance that they will not be accepted. This is because funding is rapidly drying up, yet the demand for finance has remained relatively constant (if not even increased). Lenders feel as though they have little other choice than to be overly picky towards where they allocate their funding, and due to the amount in which has been collectively lost on the sub prime markets there is all the more reason to be.

It is unclear as to when the troubles that are currently affecting the UK’s financial markets will change for the better, but many analysts believe that the situation is set to worsen before it starts to improve.

Home sellers around the country are facing one of the toughest times on record in the hunt to find a prospective buyer.

A popular online home acquisition firm has revealed that some 50% of active home sales are collapsing at the final stages of completion. The firm speculates numerous reasons as to why this could be happening, and cites difficulties in attaining competitively priced home loans coupled with last minute market jitters from buyers, as the root cause of the problem.

The firm has also suggested that large numbers of home sellers could be presented with something of a double blow in wake of the decline. First of all you will have a large percentage of fixed rate product home sellers, who are desperate to off load their current property in order to avoid the detriments of rising rates after their term comes to an end. Secondly, this same set of people will leave themselves additionally exposed, as any fees paid during the selling process will have been lost.

Commenting on the news, one industry expert suggested that buyers, especially FTB’s, have become extremely cautious towards committing to a new property. Although there is no definitive evidence that property values will fall, prospective buyers are not comfortable with taking that chance, preferring instead to delay their purchases whilst monitoring market performance over the next 6 to 12 months.