House Prices Still In Decline
The value of houses across the UK fell by 1.1% during the month of April, it has been revealed by the Nationwide Building Society. This has been the first month in which prices have fallen in all areas on a year-on-year basis since March 1996.
The announcement adds weight to the argument by many that the impact of the global credit crunch will hit us harder than was first thought, with some experts predicting a decline in values of up to one third. Others take a more optimistic view and suggest that the recent reduction is due to a lack of consumer confidence in the market. People are not prepared to commit to buying a house at the moment due to the negative press coverage we see on a daily basis, leading to a surplus of houses for sale, which inevitably leads to a reduction in price.
The general slowdown in the housing market is placing additional pressure on the Bank of England to reduce interest rates further still. There have been three rate reductions since December 2007 and it is thought that there will be another reduction in June this year. However, rising food and fuel costs are keeping inflation higher than the Bank would like, which means that rates will probably not fall to the extent that many home owners would like to see.
It also means that fewer loan and mortgage applications are being made, not only for those buying a house, but also for existing home owners looking to raise capital through either a re-mortgage or a secured loan as they see the equity in their homes being reduced.
We must remember though, that these price reductions are on the back of huge rises in property values over the past ten years and what we are witnessing at present is hopefully just a price correction, which will allow buyers to re-enter the housing market.
