Main Site Navigation

• current accounts
• savings
• credit cards
• insurance
• loans
• mortgages
• investments
• pensions
• finance blog

You are here: > Home > Mortgage > Mortgage News

search:    

Credit crunch to take the froth out of housing market

Monday 1st October 2007

Britons feeling whipped by the credit crunch are to "take the froth" out of the housing market, it has been suggested.

Figures published by Nationwide show that the market remained reasonably robust in September, with a monthly increase in house prices of 0.7 per cent.

This compares to a 0.6 per cent rise in August, leading chief economist Fionnuala Earley to assert that consumers are "seemingly shrugging off the unsettled events of the past month".

However, she notes that the annual slump in growth - from 9.6 per cent in the year preceding August to nine per cent in the 12 months to September - could indicate a longer trend.

"The longer-term effect will undoubtedly be to take some of the froth out of the market," she states.

Oliver Gilmartin, senior economist at the Royal Institution of Chartered Surveyors, echoes the prediction.

"The underlying trend remains downward and credit market turmoil is yet to show up on the balance sheet of households," he comments.

Mr Gilmartin adds that any prolonged period of turmoil could result in a negative swing in consumer confidence - which has so far remained strong.

A tightening in lending criteria is also observed by Ms Earley as mortgage providers look to limit their exposure to risk.

While high loan-to-value ratios and mortgages with no deposit are still available, she suggests that such products are "now more expensive, reflecting the extra risk involved".

But Ms Earley recognises that many economists have anticipated a slowing in consumer credit for some time.

"The tightening of credit conditions may indeed be the trigger that causes this long-awaited trend to emerge," she concludes.

©

Other related stories