Communication 'crucial' in avoiding property crash
Published On 25 January 2007
Better communication between lenders and borrowers should ensure the housing market will not experience a price collapse similar to that which occurred in the 1980s, a spokesman for the UK's leading mortgage packager and distributor, Firstrung, has said.With interest rates steadily rising, there has been some concern that the housing market could drop dramatically, leaving some British homeowners in deep economic trouble.
The economic recession and slump in the housing market at the end of the 1980s led many British homeowners defaulting on their mortgages, with home repossessions peaking at 134,000 in 1991.
However, Firstrung is confident that such a catastrophe will not happen again.
A spokesman said: "I think if we are to have a house price correction this time around repossessions will come nowhere near the levels they did in the late 80s, this is because lenders are far more willing to talk to their borrowers.
"Yes, interest rates have increased three times in the last six months but they are only quarter per cent rises, not the massive erratic rises we saw last time.
"I think the gradual squeeze on expenditure has come as no surprise."
However, Firstrung has warned that should first-time buyers continue to pay increasing proportions of their wages on their mortgages, sacrifices will have to be made.
There will be "no more extras that we have come to take for granted over the past few years like holidays and plasma screen TVs", the spokesman added.
