House Prices Stabilising or Dead Cat Bounce
by The factors behind the recent rise in house prices.
Recent surveys by Halifax and Nationwide have suggested that UK house prices have started to rise very slightly. Real estate agents claim these are green shoots and everyone should start buying again. Of course because house sales are so low you need take these surveys with a pinch of salt.
With most lenders requiring a 25% deposit, you need to have a sizeable pile of cash. If the only rich people are buying, the houses sold are likely to be above average, giving the impression that average house prices have risen.
The other factor coming into play is the bottoming of the interest rates. When interest rates are at 4.6% an interest only £200,000 mortgage will cost £9,200. But if interest rates rise to 5.2%, £9,200 will only service a £177,000 mortgage. So even if house prices are going to fall another 11% you could be better off buying now. Assuming that house prices will recover before your fixed term matures.
As interest rates, petrol prices and unemployment continue to rise and wages and hours are reduced, household budgets will face ever more pressure. More people will be forced to sell their homes, pushing down house prices once again.
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