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Fastest House Prices Fall in UK for 15 Years

[ Posted June 8th, 2008 ]

The decline in the house_prices has been almost 4% in the past year, its fastest rate since 1993.

One of the big investment banks JP Morgan has warned that this downward trend in house_prices could turn into a rout.

Howard Archer an analyst at Global Insight has warned that “The latest data on the housing market are undeniably alarming”. Adding further he said “Clearly the downward pressure on house prices coming from stretched buyer affordability and tight lending conditions is now biting hard”. Mr Archer also predicted that the misery in the housing market is here to stay for sometime, with house prices likely to fall 12% both this year and also next year.

Halifax has reported that the property prices have dropped 2.4% in the month of May alone and have fallen 9.4% since their peak in August last year.

The Royal Institute of Chartered Surveyors reported that the number of new buyers fell to a record low for the 17th seventeenth consecutive month in April.

The Bank of England announced that the new mortgage approvals has dropped almost 50% in April compared with the same month last year. Only 58,000 new mortgages were approved in April which is the lowest since the records began in 1993.

Other major organisations such as the Council of Mortgage Lenders and the Royal Institute of Chartered Surveyors has warned of a decline in property_sales this year of almost 35% to 40%.

The chief economist Simon Rubinsohn at Royal Institute of Chartered Surveyors has warned that such a downturn in the housing market would have a big knock-on effect on the wider economy. He said "Lenders are continuing to tighten up on the conditions accompanying new loans making it hard for first-time buyers to take advantage of the modest fall in house prices seen over the past few months," He also added that "A collapse in transactions of this magnitude has major implications both for consumer spending and a wide range of ancillary industries.".

The Bank of England also kept interest_rates unchanged last week which does not help the bleak situation of the housing market either.

However there is some good news for first time buyers and thousands of young people who have been priced out of the property market. A recent report by the analysts at Hometrack predict that if the house prices fall by 10% then a fifth of those currently priced out will be able to buy a two or three bedroom house. It also reveals that almost 28% of young people working in UK are unable to buy even the cheapest properties in their local area. This situation is much worse in London than in the other parts of UK.

Note – Can use the mortgage_calculator on this site to calculate your monthly mortgage payments.

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