Mortgage crisis must be stopped to avoid crash

Permalink: Mortgage crisis must be stopped to avoid crash
by Kay Murchie

A report by property website, Rightmove, warns if the mortgage meltdown is not stopped, falling property prices could result in a crash.

Traditionally, March and April are good months to sell your property as it is a time when the market improves and prospective buyers go house-hunting.

However, according to Rightmove, a vast amount of properties are being put up for sale but buyers are not materialising. Those lucky enough to find a buyer are having to waiting longer than before.

Over the weekend, the Bank of England announced details of a £50 billion plan to help prevent the credit crisis causing more damage to the UK banking system and economy.

Mervyn King, the bank’s governor, said the scheme is aimed to improve liquidity in the banking system.

Rightmove said the mortgage crisis could have a devastating effect on the UK housing market if the Bank of England’s £50 billion emergency rescue plan does not work.

Miles Shipside of Rightmove said an ongoing lack of mortgage funds could spark a price crash if an increasing number of sellers are forced to seek rarer mortgage-free cash buyers or those with large deposits.

As well as being thinner on the ground, these buyers will be able to demand larger discounts, added Mr Shipside.

Mr Shipside said the housing market was undergoing ‘a reasonable correction’ after an extraordinary boom which lasted over 10 years.

The organisation‘s figures show that the average asking price is currently £239,521, only just above the level that it was a year ago. In the North-West, the average asking price of a property has fallen to £176,431, down £7,681, or 4.2%.

However, the problem is worse in London as Rightmove said that asking prices for houses in nearly every London borough have plummeted in just a few weeks with the average asking prices in Kensington and Chelsea falling £33,000 to £1,458,558, which represents a 2.2% fall between March and April.