Mortgages Uncovered

Falling house prices have started slowing said Nationwide last week although experts have already predicted that they have much further to fall yet. Nationwide said prices fell 0.4% in November and 13.9% over the last year. However, these prices were a little better than originally expected as analysts had otherwise forecast a 1.6% monthly drop with an annual predicted fall of 14.9%.

Economists still believe that prices have to bottom out in the market.

“With the economy set for a deep recession …we expect the sharper downward trend in house prices of recent months to reassert itself,”

said Seema Shah at consultants Capital.
More cuts to interest rates are set to boost the flagging housing market because not all banks are passing them on to customers in full. The Bof E’s committee of monetary policy cut 1.5% off rates in November to leave rates standing at 3%, analysts now are forecasting it will go on to cut at least another 0.5% after next week’s meetings.

Home Builders Federation spokesman, Steve Turner, said it was vital to restore the economy’s mortgage lending to aid recovery in the market.

“For this reason we believe it is imperative that the government acts on [Sir James] Crosby’s recommendations immediately and does not wait until next spring, he said, referring to Crosby’s plan that the government should provide £100bn of guarantees to the mortgage-backed securities that were used to fuel home loans before the credit crunch. Turner added that Brown also restated the commitment that Alistair Darling, the chancellor, made when announcing the banks’ refinancing package in September that he would use government influence on the banks to restore some sensible levels of lending. “