The Halifax reported a small monthly fall in house prices during February. The monthly decline of 0.3% took the annual inflation rate down to 4.2%. Although house prices have now fallen for 3 months, the fears over a huge housing slump in the UK are not materialising just at the moment. Certain factors are underpinning house prices (according to the Halifax average UK house prices are just over £197,000)
- Low Interest rates. Interest rates of 5.25% make mortgage payments relatively affordable. If anything interest rates are likely to go down (even if mortgage lenders are not always passing the base rate cuts onto consumers)
- Supply and demand
- Resilient Buy to Let Market - strong because of rising demand in the renting sector
However, the Nationwide suggested an acceleration of house price falls in February and pointed to the dramatic falls in mortgage lending as evidence the housing market could face a difficult year ahead.
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[...] This graph shows that equity withdrawal has contributed to higher consumer spending. If house prices fall then this equity withdrawal will dry up leading to lower consumer spending. Falling house prices will also have a significant bearing on consumer spending. It is uncertain how much house prices will fall by. Some people predict house price falls of 20%. But, personally I feel the shortage of supply and low interest rates will keep house prices fairly stagnant. (house prices continue to fall) [...]
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