Mortgage Guides

House prices: Past, present and future

Add a comment

Send to a friend

Writes Hazel Cottrell hazel@consumerchoices.co.uk

What has happened to house prices and what will happen next? This guide explains the facts (5/11/09).

Whether you are considering buying a house, or recently stepped on the property ladder, it’s likely you’ll be keeping a close eye on house prices.

In this guide we look at what has happened to house prices since the credit crunch, where they are now and where they might be are heading.

Santander Fixed Rate Mortgages

Santander offer a great range of award winning
fixed rate mortgages from 4.1%
Fix your mortgage for up to 5 years

on Santander mortgages

Call Santander on 0800 032 4266

Past

Prior to the credit crunch there was a boom in the property market. House prices were climbing at an impressive rate and it appeared that they would continue to do so.

In January 2008, house prices were at their highest, averaging £184,203, according to the Land Registry (www.landregistry.gov.uk).

Property looked like a safe investment and so banks were happy to lend. However, the increasing cost of property made it more expensive for first time buyers to get on the ladder.

Then the credit crunch hit. House prices fell dramatically and by April 2009, the average house was worth £152,761, having lost 17% of its value.

Present

Since April, house prices have been creeping up tentatively. The latest Land Registry figure show that the average house price was £158,337 in September – 0.9% higher than the previous month, but still 5.6% lower than last September.

So, houses are now cheaper than they were before the credit crunch, which is positive news for first-time buyers.

However, while house prices appear to have stabilised over the past few months, there is the risk they will fall further.

As a result, mortgage lenders are demanding that borrowers put down hefty deposits, to minimise the risk they will fall into negative equity. This is bad news for all first-time buyers without substantial savings.

Future

Experts don’t seem to be able to agree at the moment where house prices will go next. Some believe we have seen the bottom of the market, while others are predicting further falls. However, most agree that the house price recovery will be slow.

David Hollingworth, head of communications at brokers London & Country (www.lcplc.co.uk), says: “I expect a fairly muted and slow recovery – small steps”

Katie Tucker, technical manager at brokers Mortgageforce (www.mortgageforce.co.uk) , says: “I think if house prices continue to rise this slowly, it should be stable, but if we were seeing monthly jumps of 2-3%, I would expect another drop.”

If you are considering buying a house, you need to take into account the possibility of further price falls. Having said that, Hollingworth advises potential borrowers to concentrate on buying a home that really suits their needs and “think of the long-term” over which time property prices are expected to rise.

Read our guide, can I afford a mortgage, for help deciding whether now is the right time for you to get on the property ladder.