Housing Market News And Views House Price Crash: Should You Buy?

Date Published:

23/12/2008

Interest rates rises aren’t on the cards just now. In fact, the Bank of England’s base rate cuts would usually mean cheaper mortgages. But experts including the National Association of Estate Agents(NAEA) say that mortgage rates haven’t dropped as much as borrowers had hoped and the rate needs to be passed onto buyers to kick start the housing market.

Are The Bank Of England’s Base Rate Cuts Good News For Buyers?

Interest rates rises aren’t on the cards just now. In fact, the Bank of England’s base rate cuts would usually mean cheaper mortgages. But experts including the National Association of Estate Agents(NAEA) say that mortgage rates haven’t dropped as much as borrowers had hoped and the rate needs to be passed onto buyers to kick start the housing market.

‘Lenders must commit to passing these savings onto consumers,’ says Melfyn Williams at National Association of Estate Agents(NAEA). ‘This will help thousands of young people looking to buy their first property. These interest rate reductions coupled with a clear move from the lenders would send a strong and postive signal to house hunters and owners everywhere.’

Ian Dickson, director of Winkworth offices in Hammersmith and Shepherd's Bush in London also hopes the cut will encourage buyers to start house hunting again. ‘These cuts do mean that the affordability gap, which has already shifted with drastically falling house prices, will close even further. First-time buyers and those looking to move up the ladder, may finally be about to have their moment and long overdue it is, too!’ he says.

Should First-Time Buyers Step On The Housing Ladder?

People who have nothing to sell, whether they are renting or living with family or friends, will certainly welcome the decline in house prices and rates, says Louise Holmes at financial data provider Moneyfacts. ‘And first-time buyers will be viewed by sellers as a major plus as they aren’t stuck in a housing chain,’ she adds. However, Holmes says there are substantially less mortgage deals for house buyers to choose from. ‘A year ago there were some 6,403 residential mortgages to choose from, but now there are fewer than 2,189,’ she says.

Plus you’ll need at least a 25 per cent deposit to get a decent rate on your mortgage says Holmes, otherwise the choice narrows and the costs increase sharply. ‘Mortgage firms are tightening their belts when it comes to their lending criteria and in particular, maxmimum loans. The fall of the 100 per cent mortgage now means that first-time buyers will have to come up with a sizeable deposit. This will prove difficult or impossible for many, particularly those with lower incomes and savings,’ she says.

Before the credit crunch, Ray Boulger says many lenders offered the same rate for all mortgages up to 90 per cent loan-to-value (LTV). ‘Now very few lenders are offering mortgages at 90 per cent LTV or indeed at 85 per cent. Not only is the choice very limited but rates will typically be at least one per cent higher than rates charged to borrowers with a 40 per cent deposit,’ he adds.

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