Looking To The Future, It’s Not All Doom And Gloom
Looking To The Future, It’s Not All Doom And Gloom
There is a lot of bad news around in the property and mortgage markets, and it seems unrelenting. However, there are some pieces of underlying good news which should eventually see a more solid property and mortgage market in the future.
It is difficult to find good news in the property market these days. It just seems to be one piece of bad news following another.
The latest batch of numbers make grim reading:
There has been a 56% drop in the number of mortgage approvals in the last month compared with the same time last year.
At the height of the housing boom there were nearly 92,000 mortgages taken out in a month, but in May just gone, there were less than 28,000.
The average fee for a fixed-rate mortgage has reached £860.
The average rate for a two-year fixed rate mortgage has reached a ten-year peak, now at 7.02%.
The average rate for a fixed deal has increased by 0.25% in the last week alone.
Add to this the fall in share prices of banks and the future looks bleak. HBOS, for example, has seen its share price fall by over 72% in the last 12 months. It and Bradford & Bingley are going to shareholders to ask for more money.
Are there any silver linings in the current situation? The answer has to be yes.
Industry watchers had been forecasting a price correction in the housing market, and this is what we are now experiencing.
The irresponsible lending by banks and building societies, which was at the root of the credit crisis with sub-prime borrowers in the US, will become a thing of the past. Lenders have to, and are, tightening their lending criteria. This is a good thing.
While demand has inevitably fallen in the market, there has not been any evidence of panic selling. Indeed, most people seem to be taking things in their stride.
The fall in house prices – with the caveat that mortgages are rather expensive – will eventually lead to more first-time buyers joining the market, where they had all but been priced out of it before.
It’s not all doom and gloom. It may take a year or more from now, but after the dust has settled we should see a fresh and solid property and mortgage market based on truer values in all senses of the word.
