The Rics study states that the number of unsold properties in the UK rose by another ten percent in January of 2008. This increase, along with the previous three months' increases, lends to the loosest housing market conditions in two years. Experts believe this slowdown in the market is even worse than the slowdown of 2005 because with the current downturn, the rate at which housing prices are falling is quickening in pace.
According to the Rics survey, 56 percent of respondents said that house prices in their areas are on the decline, and only 2 percent said they believe that the prices in their areas are on the rise. The housing market hasn't been this downtrodden since 1992. Also, confidence that the housing market will rebound is as low as it has been since 1998 when a question on the topic of confidence in the market was added to the Rics survey for the first time.
The survey by Rics shows that tighter credit conditions and falling consumer demand are to blame for the weakened state of the housing market, while the downturn in the market in the 1990s was due to a rush of forced sales. Chief economist at Rics, Simon Rubinsohn says that buyers are hesitant to enter the market right now since lenders have tightened their lending criteria and many of the same lenders have not passed on the benefits of the two previous Bank of England base rate cuts to borrowers.
In contrast to Rubinsohn's statement, director-general of the Council of Mortgage Lenders, Michael Coogan says that the decline in lending is "driven more by funding constraints [on lenders] than lower consumer demand." However, the Rics survey shows that the number of buyer inquiries has decreased significantly over recent months.
To add to the shakiness of and lack of confidence in the housing market, property repossessions are at their highest level in years. People are finding it harder and harder to keep up with the high interest costs on their mortgages. However, this higher rate of repossession (.23 percent of all outstanding loans) is still lower than the number of repossessions seen at the peak level in 1991.
According to the Financial Times, the Bank of England rate cuts from 5.75 percent to 5.25 percent in the last three months should have decreased the price of borrowing by nine percent, but because lenders are withholding the benefits of the rate cuts, borrowers are finding lending costs as high, if not higher, than they were when they first took out their mortgages. Remortgaging to get a lower rate is becoming more difficult because lender criteria is becoming even more strict than it used to be.
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