House Prices Could Decline 25%

Ed Stanford, a property economist at Capital Economics said it was entirely plausible that house prices in the UK could fall by 25% in the next couple of years. He argued that a combination of factors threatened to bring prices substantially lower

Shortage of Mortgage lending - Recenly many lenders have withdrawn cheap 2 year fixed deals which has been an important source of funding for first time buyers.  This is due to the credit crisis and shortage of lending.

Sliding consumer confidence. Homeowners are no longer so optimistic for housing to provide a good source of capital gains. People no longer share the view that house prices will ‘always rise’

Today, Hometrack announced a sixth monthly fall in house prices leaving the annual rate at 0.2%. This is the lowest annual inflation rate for several years. The consensus for housing forecasts is for house prices to fall by 5%. Yet, despite falling prices and small cuts in the base rates, the affordability of mortgages is not really improving as mortgage lenders increase their profit margins.

• House prices set to fall