Major Lender Indicates Tough Year Likely
It is estimated that UK home prices will fall at least 5% next year, as the government applies provisions to help erase the national deficit. Countrywide’s CEO Grenville Turner remarked on next year in general, saying: "It will be another tough year." The mortgage broker is located in Milton Keynes and is the architect on about 10% of all British home sales.
Turner believes home prices will drop in cities with the highest proportion of state employees. North East England saw the average values decline almost 10% in October compared with last year. At the same time in London however, they rose 7.6% according to the Land Registry. Currently prices are down about 10% from their peak in 2007. There are reasons for this including: government cutbacks, stricter lending criteria and lower wages. Property transactions will come up short this year, compared to 2009. Turner commented on pricing and how it relates to sales, saying: "We are having to adjust expectations on prices. People wanting to sell have to recognize that they have to change prices." He also remarked that interest rates probably won’t change next year, and banks won’t change lending practices significantly. For someone to obtain a cost-effective interest rate, their down payment has to be significant. Turner said being able to provide a down payment of 40% compared to 10% can mean the difference of about 4 to 5% interest rate advantage.