Encouraging news for housing market, expert reports

Although general economic conditions are not looking good, there is some encouraging news for the housing market, one financial expert says.

Fionnuala Earley, chief economist at Nationwide, says predictions of two increases in interest rates have not been realised and no change is now expected.

"This has filtered through to the swaps market," she comments.

"Swap rates have fallen which has allowed new fixed mortgage rates to come down."

And although some 40 per cent of house purchases fall through, the Bank of England Agent''s report suggests this is due to the reluctance of sellers to accept lower offers, indicating that homeowners are not being forced to sell, Ms Earley adds.

She believes that as the cost of mortgages comes down, activity could be bolstered and some liquidity restored, although she says this will not happen overnight.

Earlier this week Paul Holmes, chief executive officer of Firstrung, said first-time buyers need house prices to correct.

He commented that the market is ripe for considerable correction, which would then allow first-time buyers to buy a property with a reasonable level of mortgage.

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