Bank of England expects little change in house prices as lending falls again


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The Bank of England has warned that house prices are likely to remain stable or even decline in 2011 amongst continued concerns about the lack of access to mortgage finance. The lowest September mortgage lending total since 2000 did little to assuage concerns about the fragile state of the UK housing market.
Property prices continue to stagnate
The Bank of England published its Trends in Lending report this week and stated that lenders expect house prices to ‘remain little changed or to decline slightly in 2011’. The Bank also reported that mortgage lending had been lower than anticipated over recent months due to worries about Government spending cuts and continuing economic uncertainty.
The Daily Telegraph reports that ‘lenders do not expect a significant improvement in the number of mortgages approved for those buying a new home before the end of the year, with approvals to fall or remain broadly unchanged’.
Mortgage lending dropped to a 10-year low last month, extinguishing any sign of a traditional post summer bounce in mortgage activity.
Mortgages still hard to come by say expertsJonathan Cornell, of First Action Finance, said: “There’s a chronic lack of funding in the market and with the austerity measures kicking in, the situation is going to get a lot worse. Anyone hoping for house price rises is going to be bitterly disappointed.”
Melanie Bien, of mortgage brokers Private Finance, agrees. “Swingeing public sector job cuts are set to have a significant impact on house prices. In those parts of the country where many are at risk of losing their jobs, getting a mortgage is going to become increasingly difficult because of the uncertainty, which will have a negative impact on prices.”
The Bank of England themselves recently warned that lenders had ‘tightened credit scoring criteria’ and were expect to tighten them even further as they adopted a more ‘cautious approach’.

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