Rise in the Housing Market Prices

In the last ten years we have seen such a significant increase in the housing prices that it has totalled 200 percent. This massive rise could be a problem for first time home buyers. A recent study completed on figures from 1997 to 2007 showed that average price for a first time buyer home rose from 52, 674 pounds to 159, 494 pounds. This study also showed that the housing price to income ration doubled from 1.72 to 3.4 percent. The performance by London’s housing market in the last few years has made it especially difficult for homeowners to find the down payment to buy a home. The index research for the city of London actually showed an increase of 260 percent which means the average home costs 260,000 pounds.

The weekly income of most working households has only increased by 53 percent in the same time period. This means that those earning 590 pounds are now earning 900 pounds per month. The mortgage payments per home have also increased to the point of 172 percent. This means that instead of paying 300 pounds the homeowners are now paying 830 pounds each month. In London the prices have increased from 430 pounds to 1340 pounds over the last ten years.

These drastic changes have caused the first time home buyers to back off from the market. With the figures getting worse and worse it is harder for the first time home buyers to come up with the needed payments. The canyon between the affordability and cost of housing has widen to such a degree that it could cause more issues.

Currently the housing rates have been falling across the UK. These falling prices have still not brought back the first time home buyers. In June of last year there were 34,000 mortgages for first time home buyers compared to the 18,000 in February of 2008. This is a drastic reduction for the mortgage industry.

Part of the trouble has centred on the credit crunch. Those who wish to own a home are coming up against the tougher lending options. The 100% loan to value loans have been removed from the market by almost every lender and the increase of borrowing costs have made it almost impossible for the first time home buyer to gain any home.

Even with the falling housing prices the lenders are going to probably increase their mortgage rates. This means they will be making the situation worse than it already is.

According to the Liberal Democrats spokesperson Lembit Opik certain things need to be explained. Those who are struggling with repaying their loans need to know how the government is going to help them and keep them from a negative equity situation. If these families don’t get support for the struggling repayment situation there are going to be more homes repossessed in the next few months. The government needs to make the first time home buyer options more attractive with lower interest rates to save the economic situation.

Back To Financial News April 2008
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Abuse of Government Credit Cards
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Rise in the Housing Market Prices
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