The number of property buyers in the UK could dramatically decrease over the next month. If this does happen it could mean that the property market could falter and house prices could even start going down. So what’s causing this uncertainty.
For the last decade the UK’s property market has been booming. The late 1990’s saw a gradual fall in interest rates. This cumulated in 2003 when you could pick up a two year fixed mortgage for around 3.7%. With rate slow the property buyers and owners of this country all felt much wealthier as the cost of their loans had dropped. A result of this was an increase in people buying houses. As demand for housing went up, and due to the fact that this country had a very short supply of housing in the first place prices started to rise. This continued for a few years after but the present climate is much different.
Since the low of 2003, the cost of 2 year fixed mortgage has gone up and today is now above 6%. This is due to the bank of England raising interest rates which has been magnified by the fact that current problems in the financial markets are making mortgage lenders to raise rates to cover their own cost of borrowing. The Royal Institute of Charted Surveyors last month said that almost 2% of its members were now claiming that property prices were dropping. Could this be a sign of the impending property slump. Many blame this drops on the fact that at this moment in time there are some areas of the market that are oversupplied which could be causing these slumps. Two very obvious ones is the oversupply of town centre apartments but maybe a more significant one is the fact that many owners of four bed roomed houses had put there properties on the market to avoid paying for a home information pack. If you are a property buyer then it may be an opportunity to snap up a bargain.
So if many property buyers are put off buying new houses in the months to come what can we expected? Well if demand can push up prices lack of demand can certainly push prices down. However with many already priced out the market but wishing to be home owners any price reduction could well be short lived as all those previously priced out of the housing market are finally able to get in. The fact that the UK is still benefiting from a stable and growing economy, high employment also provides indication prices will not fall to far. If house prices do start to fall it would probably be as the result of unemployment rising and this would signal problems for the wider economy. The good news for property buyers is that if this were to happen the bank of England will probably reduce interest rates to try and bring about a recovery and so saving home owners money on their mortgages.
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