The Chancellor of the Exchequer, Alistair Darling, has stated that the UK is less likely to suffer a house price crash than the UK because of a number of factors, which include low unemployment, a shortage of homes, and falling interest rates. Darling was speaking earlier in the week at the Engineering Employers’ Federation Dinner in London, and indicated that he was still confident about the UK’s housing market despite falling house prices.
At present house prices in the UK are around 4% higher than they were at this point last year, but house price inflation has been dropping, and many experts predict that house prices could fall by between 5 and 10% this coming year. There has been a marked slowdown in the UK property market, and this has been made worse by financial turmoil caused by the credit crunch, higher living costs, and tighter lending conditions from creditors.
However, despite rising repossession levels Darling stated that the situation is unlikely to get to the same sort of stage that it got to in the 1990s. He said: “Market conditions today are very different from those we saw in the early 1990s. Interest rates remain at comparatively low levels - as do mortgage rates. And unemployment is currently at 30-year lows.”
He also added: “What’s more, there are important differences between the housing market in the US and the housing market here. While many US mortgages were sold at hugely discounted rates, leaving people unable to meet repayments when rates increased, lenders in the UK have been more responsible in taking account of an individual’s ability to pay. And demand for housing outstrips supply.”
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