Housing Market Forecasts for 2008

By MoneyhighStreet Staff. Published on April 1, 2008 This post currently has no comments.

House prices2

In spite of the best central bank efforts, the Credit Crunch continues to hit the UK hard in several different areas, and it is widely expected that house prices will stall during 2008. With mortgage banks such as Northern Rock facing tremendous difficulties as a result of the crunch, the number of home repossessions continues to increase, with an even greater increase predicted for this year. The fall will be felt especially hard in the south of England, where prices had previously risen even faster than the rest of the country.

It has been predicted that, in the next two years, the UK housing market will decline by at least 15%. Taking inflation into account, this is an even greater decline in real terms. As stated, the south of England will be a major loser in this decline, but London will also suffer badly, with a fall of as much as 25% predicted in the capital. With interest rates peaking presently, it is predicted that they will be sharply cut in the second half of this year, suggesting that the country's economy will be growing at a significantly lower rate during this year.

The problems will be compounded if the buy to let boom ends, as a spate of such investors cutting their losses would further quicken a decline in house prices. Such a situation is not unlikely, as the rising mortgage rates and falling rental yields will see many such speculators being unable to cover their mortgage repayments. Together, the credit crunch and the end of the buy to let boom could well result in a decline in house prices that is much higher than previously expected.

So what are homeowners advised to do as house prices plummet and they face losing serious amounts of money? Firstly, if they are planning on selling their home they are advised to do so sooner rather than later. With further falls in the market seemingly inevitable, delaying such a sale would be a significant error. Cash should then be invested in Fixed Interest Bonds, Government Bonds or national Savings Certificates.

Whether the predictions are exaggerations or underestimations, it seems clear that the UK is about to follow the United States in seeing its housing market decline significantly. 2008 seems certain to be a year of falling house prices and general economic insecurity, and homeowners in particular would benefit from knowing their options early in the process.

A depressed property market makes it more important than ever to ensure you're getting the best deal possible from your mortgage provider so it's worth comparing your current deal with the rest of the market. Alliance and Leicester are currently offering some of the best mortgage rates and loans around and big the lenders such as Natwest should offer a diverse rage of mortgages so you can find the deal that matches your needs.

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