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The Credit Cruncher was conceived to help you to keep up to date with credit crunch and recession developments, it provides some helpful credit crunch advice and it addresses personal debt. The Credit Cruncher also seeks to explain how the credit crunch started and shed some light on the worldwide recession. Recently, we have begun to look at how BREXIT will affect the UK economy. Please feel free to leave comments where relevant.

30 Jul 2009

Optimism in the housing market

There is a degree of cautious optimism creeping into an apparently recovering property maket, however, like a recovering addict, the emphasis is on 'cautious' rather than 'optimism'.

The Nationwide have released figures indicating that July was the third month running in which house prices have risen. The July figure is a 1.3% rise bringing down the annual rate of decline to 6.2%. The change over the last three months indicates a rise of 2.6%. The figures can only be interpreted loosely as the peculiarities of the current climate are likely to throw up anomalies. Nevertheless The Nationwide are predicting the possibility of prices being higher at the end of the year than they were at the start - a bold prediction..
Why is this prediction so bold?
Whilst demand is pushing prices up in the short-term, supply has been repressed by the evident drop in prices. If prices are shown to be on the increase, the market could be flooded once prospective sellers start entering the market again...this could result in prices being driven down yet again.
Low interest rates are being cited as an incentive, yet many house buyers are finding it difficult to take advantage of the Bank Of England low lending rate through obstructive practices by the mortgage vendors.
Earnings are not rising in line with house price rises, so prospective buyers (already cautious) may be restricted in their buying power.

The news that mortgage approvals are on a high, has to be offset by the fact that throughout the economy, the rate of increase in consumer borrowing is in serious decline. The worry-factor has prevented people from over-stretching their resources in the way that we have become accustomed over the last decade or so. In my opinion, that is not a bad thing, however a decline across the economy is unavoidable if borrowing is to even out to a reasonable level.

Related posts:
When will the property market recover?
25% house price drop expected
Worse-case scenario for house prices
Sub-prime mortgages to blame?

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