Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Life Sciences Biotech Smaller Cap High Risk Stocks Investing Binge - 24th Jun 21
Central Banks to Keep Buying Gold - 24th Jun 21
Will Gold Survive Hawkish Fed? - 24th Jun 21
The Clean Energy Compound That Could Change The World - 24th Jun 21
Everybody's Getting Rich (and Having Fun) Except Me - 24th Jun 21
WESTERN DIGITAL WDC Stock Trend Analysis - CHIA! - Risk 1 - 23rd Jun 21
AMC Is the Best-Performing Stock in America: Don’t Buy It - 23rd Jun 21
Stock Market Calling the Fed‘s Bluff - 23rd Jun 21
Could Bitcoin Price CRASH Target A Bottom Below $7500? - 23rd Jun 21
Bitcoin and cryptos: Your 'long-term investment'? - 23rd Jun 21
Unlocking The Next Stage Of The Hydrogen Boom - 23rd Jun 21
USDT Ponzi Scheme FINAL WARNING To EXIT Before Tether Collapses Crypto Exchange Markets - 22nd Jun 21
Stock Market Correction Starting - 22nd Jun 21
This Green SuperFuel Could Change Everything For the $14 Trillion Shipping Industry - 22nd Jun 21
Virgin Media Fibre Broadband Installation - What to Expect, Quality of Wiring, Service etc. - 21st Jun 21
Feel the Inflationary Heartbeat - 21st Jun 21
The Green Superfuel That Could Disrupt Global Energy Markers - 21st Jun 21
How Binance SCAMs Crypto Traders with UP DOWN Coins, Futures, Options and Leverage - Don't Get Bogdanoffed! - 20th Jun 21
Smart Money Accumulating Physical Silver Ahead Of New Basel III Regulations And Price Explosion To $44 - 20th Jun 21
Rambling Fed Triggers Gold/Silver Correction: Are Investors Being Duped? - 20th Jun 21
Gold: The Fed Wreaked Havoc on the Precious Metals - 20th Jun 21
Investing in the Tulip Crypto Mania 2021 - 19th Jun 21
Here’s Why Historic US Housing Market Boom Can Continue - 19th Jun 21
Cryptos: What the "Bizarre" World of Non-Fungible Tokens May Be Signaling - 19th Jun 21
Hyperinflationary Expectations: Reflections on Cryptocurrency and the Markets - 19th Jun 21
Gold Prices Investors beat Central Banks and Jewelry, as having the most Impact - 18th Jun 21
Has the Dust Settled After Fed Day? Not Just Yet - 18th Jun 21
Gold Asks: Will the Economic Boom Continue? - 18th Jun 21
STABLE COINS PONZI Crypto SCAM WARNING! Iron Titan CRASH to ZERO! Exit USDT While You Can! - 18th Jun 21
FOMC Surprise Takeaways - 18th Jun 21
Youtube Upload Stuck at 0% QUICK FIXES Solutions Tutorial - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations Video - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations and Trend Analysis into Market Correction - 17th Jun 21
Stocks, Gold, Silver Markets Inflation Tipping Point - 17th Jun 21
Letting Yourself Relax with Activities That You Might Not Have Considered - 17th Jun 21
RAMPANT MONEY PRINTING INFLATION BIG PICTURE! - 16th Jun 21
The Federal Reserve and Inflation - 16th Jun 21
Inflation Soars 5%! Will Gold Skyrocket? - 16th Jun 21
Stock Market Sentiment Speaks: Inflation Is For Fools - 16th Jun 21
Four News Events That Could Drive Gold Bullion Demand - 16th Jun 21
5 ways that crypto is changing the face of online casinos - 16th Jun 21
Transitory Inflation Debate - 15th Jun 21
USDX: The Cleanest Shirt Among the Dirty Laundry - 15th Jun 21
Inflation and Stock Market SPX Record Highs. PPI, FOMC Meeting in Focus - 15th Jun 21
Stock Market SPX 4310 Right Around the Corner! - 15th Jun 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

UK House Price Falls Moderate in November to -0.4%

Housing-Market / UK Housing Nov 27, 2008 - 09:27 AM GMT

By: Nationwide

Housing-Market Best Financial Markets Analysis Article• Prices fall by 0.4% in November
• Annual rate of fall moderates to 13.9%
• Deep interest rate cuts will provide support for borrowers
• Fiscal measures may help housing market indirectly, but policies to support funding markets may be more likely to speed recovery


Commenting on the figures Fionnuala Earley, Nationwide's Chief Economist, said: “The rate of house price falls moderated significantly in November. Prices fell by just 0.4% in the month compared with 1.3% in October. This brings the annual rate of house price falls to 13.9%, down from 14.6% last month. The price of a typical house is now £158,442. This is about £25,000 less than this time last year but is still about £25,000 higher than in November 2003.

Poor economic conditions will continue to put pressure on the housing market…

“In spite of the moderation in house price falls recorded in November, with the economy in recession, conditions do not appear very favourable for a swift recovery in the housing market. The labour market is weakening, which will inevitably hinder market demand, particularly when property remains expensive relative to earnings. With prices falling at their current rate there is also little incentive for new borrowers to hurry into the market. However, there are a number of measures which should provide some support to the market in general and help existing and potential homeowners in these difficult times.

…but falling interest rates will soften the impact

“The Monetary Policy Committee’s decision to reduce interest rates by 1.5% at the November meeting took most commentators by surprise. It was a bold step and has left no doubt that the focus of their concerns has shifted from inflation to deflation. While not aimed directly at the housing market, such a substantial shift in the Bank Rate will help a significant number of existing and potential homebuyers. Different borrowers will be affected in different ways by rate cuts. The estimated one-third of borrowers on tracker mortgages will have benefitted onefor- one from base rate cuts. About one fifth of borrowers are on their lender’s standard variable rate (SVR). Although SVRs do not change automatically when the base rate moves, most lenders have so far passed on a large part of the Bank of England’s 2.75% worth of base rate cuts since December 2007. Finally, while the roughly 50% of borrowers on fixed rate deals will not benefit immediately from rate cuts, they will face much less of a payment shock when they come to the end of their deals.

Fiscal measures could have some effect…

“The fiscal measures announced in the Pre-Budget Statement are aimed at preventing the economy from going into a deeper recession. Additional government spending, the reduction in VAT and tax and national insurance contributions for those at the lower end of the income scale may have some indirect effect on the housing market. However, this is likely to be limited unless it has a significant effect on consumers’ expectations. This seems unlikely since incomes will still be squeezed as the economy contracts.

…but measures to improve market activity more likely to help

“Some measures to try to encourage more activity were announced in September. The most notable was the stamp duty holiday. So far this seems to have had little impact on overall market sentiment or activity, though official data on mortgage approvals is not yet available for October. The raising of the threshold to £175,000 was aimed at encouraging first-time buyers, but based on average first-time buyer house prices, the change only makes a difference in four regions of the UK where average first time buyer prices are between £125,000 and £175,000. This does not include London and the Outer Metropolitan region.

“Given the effect that the turmoil in financial markets has had on the availability of mortgage finance, probably more eagerly awaited is the Chancellor’s decision on the recommendations of the Crosby Report into mortgage finance.

“Turnover rates in the housing market have fallen to historic lows, even below the levels in the 1990s when the economic conditions were worse than they are today. At the trough of the market in Q4 1990, interest rates were at 14% and there were almost double the number of unemployment claimants, yet a greater proportion of owner occupiers were taking out mortgages to move house. The significant difference today is the financial market shock which has led to the severe tightening of credit. In Q4 1990, 60% of first time buyers were taking out loans with LTVs above 90%, today the equivalent proportion is 14%. While this may reflect less desire on the part of borrowers to borrow at high LTV, especially given its higher cost, it also implies that part of the reduction in turnover today is likely to be due to the availability of finance at higher LTV.

“Not all of the limits on lending will be due to the turmoil in the markets. Some will be due to more traditional underwriting criteria taking effect in a slowing economy with falling house prices and some will be due to more accurate pricing of risk. Nevertheless it is clear that the uncertainties in the financial markets are still affecting the availability and costs of funds in the markets as banks deleverage, and this has an effect on borrowers. If funds once again became more freely flowing as a result of Crosby’s recommendations, this could stimulate levels of activity in the market and thus help to promote a swifter recovery. While there is still a great deal of uncertainty about the appetite of investors for mortgage backed securities, a government guarantee may be the catalyst required to restart this market and begin to add liquidity, especially as affordability is now improving.”

Fionnuala Earley
Chief Economist
Tel: 01793 656370
fionnuala.earley@nationwide.co.uk
Roy Beale
Media Relations Officer
Tel: 01793 655689
roy.beale@nationwide.co.uk

Notes: Indices and average prices are produced using Nationwide's updated mix adjusted House Price Methodology which was introduced with effect from the first quarter of 1995. Price indices are seasonally adjusted using the US Bureau of the Census X12 method. Currently the calculations are based on a monthly data series starting from January 1991. Figures are recalculated each month which may result in revisions to historical data. The Nationwide Monthly House Price Index is prepared from information which we believe is collated with care, but no representation is made as to its accuracy or completeness. We reserve the right to vary our methodology and to edit or discontinue the whole or any part of the Index at any time, for regulatory or other reasons. Persons seeking to place reliance on the Index for their own or third party commercial purposes do so entirely at their own risk. All changes are nominal and do not allow for inflation. More information on the house price index methodology along with time series data and archives of housing research can be found at www.nationwide.co.uk/hpi

http://www.nationwide.co.uk/

Nationwide Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in