House Prices Fall
Published: 1 February 2012 By Julian Stone Leave a Comment
January saw house prices fall by 0.2% according to Nationwide, but will the slide downwards continue?
As the UK economy contracted in the the last 3 months of 2011, we have seen house prices drop in the first month of 2012. The drop was 0.2% with the avergae house price now standing at £162,228.
The demand from buyers is limited and this, as Robert Gardner, Nationwide’s Chief Economist comments: “is partly as a reaction to the uncertain outlook for the economy, especially the labour market. But affordability is also part of the explanation – in particular, finding a sufficient deposit.”
Credit conditions remain tough and whilst interest rates are at an all time low, for those with a smaller deposit, often first time buyers, rates are higher. Getting a mortgage is not as easy as it was.
Perhaps there is a glimmer of hope with the launch of the lowest five year fixed term deal on the market from Chelsea Building Society.
As Michael Ossei, personal finance expert at uSwitch.com, says: “This Chelsea mortgage could prove a lifeline for homeowners worried about increasing mortgage payments.
“Although it may be another year before the base rate rises, the only way for mortgage rates to go in the long term is up. Consumers can protect themselves against these rises by fixing – but this has tended to come at a high price.
“The launch of this lowest long term 5 year fixed in market from Chelsea will offer peace of mind but without the hefty price tag.”
This mortgage though requires a 70% LTV and carries a £1,429 fee, a combination which may make it an impossible option for some, including first time buyers.
Michael suggests: “The next best option for those who want to budget their costs in the short term could be either Cooperative Bank or Yorkshire who have 5 year fixed rates at 3.39% both at 75% LTV with a fee of £990. ”
Even with this new mortgage product, and maybe others appearing, the outlook in the housing market doesn’t look particularly good. As Robert says “with the flow of properties coming onto the market still more of a trickle than a flood, house prices are likely to continue to move sideways or only modestly lower in the months ahead.”
MoneyHighStreet comments: “With many struggling to manage their personal finance matters, being able to fix a mortgage for a longer period of time and therefore be able to budget can be a great help.
Along with the introduction of this new 5 year fixed rate mortgage from Chelsea, Norwich & Peterborough recently launched a new 10 year fixed rate mortgage which may be of interest – see our Moneyhighstreet news item on this here.
Chelsea Building Society – click here