Latest housing market trends show no signs of recovery

The most recent comments to emerge from the government has been that of Margaret Beckett, Housing Minister, who implied that there were signs of recovery in the market and advised first time buyers to snap up bargains.

While clearly incorrect in terms of there being a market recovery, Beckett is far from wrong in that there are bargains to be had. The problem is, of course, getting ones hands on the money to buy them.

With houses already selling at up to 25% beneath the peak, and with further reductions expected over the course of the coming year, it is clear that those with access to funds stand to do good business; house prices will recover in time, and if one has the ability to hang on in there then it could be that 2009 is the year to buy.

Banks are naturally reluctant to lend at the moment. The Royal Bank of Scotland announcement of a £28 billion loss, the biggest ever in history, is testament to the trouble that the financial industry is in. However the UK governments hefty cash injection could, according to some, be the tonic that creates a revival in lending.

In an interesting U-turn it would seem that Northern Rock, subject of a massive loan from the government in recent years, has begun to encourage borrowers to remain with the bank having recently been keen to see them go elsewhere once their deals had come to a close.

Nationalised banks that begin lending again will certainly have an effect on the market situation, but will it be enough to aid recovery in a significant manner?

Shoring up the financial market is cited as an absolute necessity by industry insiders, but the worry is that the banks will continue to be reluctant to lend. It is important, therefore, that we keep a close eye on how the housing market is influenced in the coming few months.

There can be little doubt that the banking crash has changed the way mortgages will be obtained for good; reduced lending and bigger deposits are now the norm, and the days of 120% loans are long gone.

One thing is playing very much into the hands of borrowers, however, and that is the continuing reduction in interest rates applied by the Bank of England. Currently at an all time low, those with tracker mortgages stand to benefit. Anyone looking for a new tracker will undoubtedly find it no longer available.

While it is so that there are buyers out there it is also a fact that unemployment is on the rise. This paradoxical situation will lead to a further fall in prices as those who lose their jobs face the prospect of having to sell, and those who have the funds look to bag an expected bargain. Repossessions are on the rise again, and will continue to be for the coming year at least.

The ‘green shoots’ of recovery will be notably absent for the foreseeable future if industry analysts are to be believed, and the UK faces another year of turmoil in the housing market. The government appears to be doing all it can to encourage lending but to restore consumer confidence will take more than a vast injection of cash.

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