House Prices will Fall Next Year-says Bank of England

The Bank of England in its Trends in Lending report revealed that lenders expect house prices to remain little changed or to decline in 2011.

According to the bank, the mortgage approvals had been lower than expected due to uncertainty over government spending cuts and lack of confidence among borrowers. The lenders do not expect much improvement in the situation before the end of the year. In September mortgage lending had dropped to the lowest level since 2000.

Melanie Bien of Mortgage Brokers Private Finance said that public sector job cuts would make significant impact on house prices and getting a mortgage was going to become increasingly difficult.

According to Jonathan Cornell, First Action Finance, there was a chronic lack of funding in the market and with the austerity measures kicking in; the situation was reaching worse than ever.

The interest rates have dropped significantly; still the banks are continuing to tighten the lending criteria because of large defaults of borrowers and fear of unemployment among peoples. Add to this, the Council of Mortgage Lenders (CML) came with the warning that interest only mortgages could vanish because of the fear of borrowers’ ability to repay.

The property experts also warned that the house prices in places where there is a large proportion of public sector employees would be worse hit.

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