30/05/2008

Hometrack says 'hold steady'

With the news that the average home is now worth less than it was this time last year, and fears that thousands of property owners may face negative equity, the current housing picture certainly looks a grim one. According to Gary Styles, Hometrack’s risk and economics director, however, the situation in the housing market may not be as dire at predicted. Says Mr. Styles, “The wide variation in performance of lenders in the current market makes clear that the situation is not as gloomy as many portray it.

“Lenders are struggling to fund and maintain a good supply of affordable mortgages to the market but the latest volume figures are far from gloomy. Banks are continuing to grow their remortgage lending volumes and competition in the sector will intensify further as the year progresses. The FSA estimate that 1.4 million borrowers will need to refinance or remortgage their existing fixed rate deals during 2008. The signs are that the competition in this market will intensify further making more attractive offers likely. A recent example of this is shown by HSBC’s decision to offer to match existing borrower current deals if they choose to remortgage with HSBC. I think we will see far more of this risk-based pricing, with lenders choosing to focus in on lower risk remortgage deals as opposed to higher LTV house purchase loans.

“There is definite risk that some of the gloomy assessments in recent weeks will result in a self-fulfilling downward spiral in house price expectations. The current data does not support these assessments and we must avoid talking ourselves into a serious downturn. Forward-looking behaviour and clear analysis of the data makes clear that the UK economy is strong enough to absorb the impact of the credit crunch but much of this will depend on how consumers and businesses react in times of adversity.”

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