Fresh Hope For First-Time Buyers
Speaking yesterday, Graham Beale stated that house prices will continue to fall and that the average price may drop to £140,000. Whilst this is bad news for homeowners it will also mean that many others will finally be able to afford their first home.
The head of Nationwide, the largest building society in Britain, told how he believes that the housing crisis will take at least eighteen months to even start to pick up, hopefully in 2010. Many will welcome this news as it means deposits will become more affordable, and those struggling to buy their first home will have a better chance.
Housing prices peaked in October 2007, when the average was around £186,000 but this made it impossible for many first-time buyers to get on the ladder. The expected drop of 25% will reduce the average house price to approx £140,000 and this, combined with the temporary changes to stamp duty, will come as a welcome relief to many.
However, it is not good news for everybody. If house prices fall by the 25% that Graham Beale, chief executive of Nationwide, has suggested, then it will mean that thousands of homeowners will be faced with negative equity on their properties.
Beale doesn’t see the current market picking up until at least 2010 and, by then, as many as 2.5 million people could be pushed into negative equity.
Negative equity means that people’s houses are worth less than the mortgage that was originally taken out and will be disastrous for anyone who needs to sell before the market picks up. This could in turn have a dire effect on the British economy.
This latest announcement brings bad news for those who urgently need to sell, but for anyone who is willing to stay where they are, and especially those looking to buy for the first time, this news is actually quite reassuring.
