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Rising house prices in the UK may fall flat
London-April 16, 2007
In a recent report, Datamonitor-a leading provider of online database and analysis services for main industry sectors-suggests that rising levels of personal debt may shoot up the interest rates. They are concerned about the stability of the sub-prime mortgage market, as that could lead to house price crash. According to Datamonitor, the UK mortgage market witnessed an increase of approximately 20% between 2005 and 2006, i.e., from £288.4 billion it went up to £344.9 billion. Moreover, the average unsecured debt in the UK has grown by 5.4% every year since 2002, i.e., from £3,670 it went up to £4,522. Meanwhile, the number of repossessions went up from 10,310 to 17,000 during the same period. Throwing light on the statistics of 2005 and 2006, Datamonitor points out that increasing personal debt along with the prospects of rise in interest rates may contribute to house price crash.
It may also see the role of the sub-prime mortgage sector-mortgages for high-risk borrowers-become more important in the housing market. Despite these fears, Datamonitor explained, "While UK lenders are required to practice a responsible lending policy; there are players which are willing to take a riskier approach to lending by relaxing their criteria to attract more customers". "Despite the argument that they have sophisticated underwriting models in place, UK sub-prime lenders should take the US sub-prime mortgage crisis as a warning and ensure they are not over-exposing themselves to highly risky loans. Otherwise, this may have some serious consequences for the UK mortgage market”, added Datamonitor. The organisation is also keen to point out that though the risk factors should not be taken frivolously, the housing market was unlikely to collapse.
According to Karina Purang-Datamonitor financial services analyst and author of the report- "Datamonitor does not believe the housing market is on the road to a house price crash, mainly because the economy remains healthy, but the threat of a boom and bust cycle is still present.”
She further said, “A number of issues such as high levels of personal debt, averaging £4,522 per person, could have a considerable impact on the future performance of the mortgage market… Such buoyant housing activity cannot be sustained in the long-term and, undoubtedly, house prices cannot keep going up forever."
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London-April 16, 2007
In a recent report, Datamonitor-a leading provider of online database and analysis services for main industry sectors-suggests that rising levels of personal debt may shoot up the interest rates. They are concerned about the stability of the sub-prime mortgage market, as that could lead to house price crash. According to Datamonitor, the UK mortgage market witnessed an increase of approximately 20% between 2005 and 2006, i.e., from £288.4 billion it went up to £344.9 billion. Moreover, the average unsecured debt in the UK has grown by 5.4% every year since 2002, i.e., from £3,670 it went up to £4,522. Meanwhile, the number of repossessions went up from 10,310 to 17,000 during the same period. Throwing light on the statistics of 2005 and 2006, Datamonitor points out that increasing personal debt along with the prospects of rise in interest rates may contribute to house price crash.
It may also see the role of the sub-prime mortgage sector-mortgages for high-risk borrowers-become more important in the housing market. Despite these fears, Datamonitor explained, "While UK lenders are required to practice a responsible lending policy; there are players which are willing to take a riskier approach to lending by relaxing their criteria to attract more customers". "Despite the argument that they have sophisticated underwriting models in place, UK sub-prime lenders should take the US sub-prime mortgage crisis as a warning and ensure they are not over-exposing themselves to highly risky loans. Otherwise, this may have some serious consequences for the UK mortgage market”, added Datamonitor. The organisation is also keen to point out that though the risk factors should not be taken frivolously, the housing market was unlikely to collapse.
According to Karina Purang-Datamonitor financial services analyst and author of the report- "Datamonitor does not believe the housing market is on the road to a house price crash, mainly because the economy remains healthy, but the threat of a boom and bust cycle is still present.”
She further said, “A number of issues such as high levels of personal debt, averaging £4,522 per person, could have a considerable impact on the future performance of the mortgage market… Such buoyant housing activity cannot be sustained in the long-term and, undoubtedly, house prices cannot keep going up forever."
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