If you’re anything like us, you’re probably sick to the back teeth of reading about precipitous falls in house prices. So we apologise in advance for bringing you the latest slice of doom and gloom from the Nationwide, which said today that prices have dropped by another 2% in August. That means the average house is now worth £164,654, 10.5% less than this time last year – the biggest annual fall since the dark days of 1990.
And with market confidence in the doldrums, Nationwide isn’t expecting things to turn around any time soon. Its chief economist Fionnuala Earley suggested the recent struggles of the big housebuilders (Persimmon, Bovis and Taylor Wimpey have all reported huge losses) was the best evidence of this: ‘House builders in particular have been reporting significant reductions in site visits and reservations of new properties since this time last year, in spite of a big increase in the use of sales incentives,’ she said.
One consequence of all this is that we seem to be changing our attitude to mortgages. With many lenders pulling in their horns, it’s been getting more expensive to borrow money, but that doesn’t mean house buyers are opting for the cheapest deal available. Nationwide says that a growing proportion of buyers are going for fixed rate mortgages rather than trackers, despite the fact that the initial repayments are higher. They’re also choosing long term deals – five or ten years, rather than the usual two or three. This may suggest that buyers are looking for certainty amid fluctuating interest rates – or it could mean that banks are pricing us all out of two year fixed deals…
But although an ‘economic chill remains’, as Earley rather melodramatically put it, there are some reasons for cheer. She believes the Bank of England’s recent pronouncements have paved the way for rate cuts, which has pushed market rates downwards and by extension brought bank mortgage rates down at the same time. She also suggests that the data emerging from estate agents is ‘a little more optimistic’, with signs that there ‘may be some glimmers of interest returning to the market’ as falling prices and thawing rates start to tempt people back in.
However, she admits this isn’t actually having much effect yet in terms of sales. So glass-half-full types like us still don’t have much to shout about...
In today's bulletin:
House price falls hit double figures
M&S whistleblower hauled across the coals
Microsoft goes private in browser wars
UK firms lacking bouncebackability
Jordan is Britain's top entrepreneur