Two Articles on UK Housing market

FEW HOMEOWNERS WILL BENEFIT FROM INTEREST RATE CUT
Thursday December 6,2007
Nicola McCafferty for express.co.uk

THE Bank of England cut its interest rates today for the first time in two years, yet only some homeowners are to reap the benefits.

The Bank’s base rate will fall by 0.25 per cent, yet the cut would knock a mere £16 a month off the cost of a typical £100,000 mortgage - providing the cut is passed on in full.
Homeowners were warned that despite the cut, many mortgage lenders are likely to delay reducing their mortgage rates and others are expected to pass on only some of the reduction.
Some mortgage lenders may not reduce rates at all.
Yet for Halifax and Nationwide customers, Christmas will come early.
Both lenders have said they would be passing on the 0.25 per cent reduction to borrowers from January 1.
The move comes despite predictions from commentators that lenders would delay reducing their mortgage rates, with many expected to pass on only some of the reduction, while others were expected to not cut their rates at all.
The decision by Halifax and Nationwide, which was announced within minutes of base rates being lowered to 5.5 per cent, puts pressure on other groups to follow suit.
The Bank’s cut in interest rates follows fears that the UK economy is facing a sharp slowdown.
Calls for a cut in interest rates intensified this week after evidence was found that confidence in the house market and retail sector were crumbling.
Only this morning express.co.uk reported that house prices have fallen for the third month in a row, prompting calls for an interest rate cut in an attempt to steady the market.
Values dropped by 1.1 per cent in November, the biggest monthly fall for almost a year and the first time prices have plunged for three consecutive months since early 1995.
The slide pushed annual house price inflation down to 6.3 per cent, its lowest level since March this year, said the country's biggest mortgage lender.
Stuart Law, chief executive of property investment group Assetz, urged the monetary committee to drop interest rates or face a tirade of criticism.
"There's no reason not to reduce interest rates now. A failure to take immediate action could result in a more panicked move in 2008 as the Bank scrambles to regain control of an escalating credit crunch," he said.

HOUSE PRICES PLUNGE FOR THIRD MONTH
House values have dropped by 1.1 per cent

Thursday December 6,2007 By Sarah O'Grady , Property Correspondent HOUSE prices have fallen for the third month in a row, prompting calls for an interest rate cut in an attempt to steady the market.
Values dropped by 1.1 per cent in November, the biggest monthly fall for almost a year and the first time prices have plunged for three consecutive months since early 1995.
The slide pushed annual house price inflation down to 6.3 per cent, its lowest level since March last year, said the country’s biggest mortgage lender.
The odds on the Bank of England cutting interest rates from 5.75 per cent when its Monetary Policy Committee meets today were slashed after Halifax revealed the figures. Howard Archer, chief UK and European economist at Global Insight, said: “This third successive and deeper fall raises concern that the housing market is headed for a sharp correction – particularly as it follows very weak Bank of England mortgage approvals data for October.
“Evidence is coming thick and fast that house prices are cooling markedly in the face of slowing acti­vity, increased affordability pressures and tightening lending practices. There is undeniably a very real and growing risk that the
The housing market is headed for a sharp correction. Howard Archer, economist housing market could see a sharp correction.
“We now believe that there are increased worries within the Bank that the economy is headed for a sharp downturn.”Stuart Law, chief executive of property investment group Assetz, urged the monetary committee to drop interest rates or face a tirade of criticism.
“There’s no reason not to reduce interest rates now. A failure to take immediate action could result in a more panicked move in 2008 as the Bank scrambles to regain control of an escalating credit crunch,” he said.
“It must face up to the clear and present danger of an economic slowdown and cut rates immediately.
“We need to follow the example set by the US and Europe by offering further liquidity into the market and dropping base rates quickly, perhaps by as much as half of one per cent.
“If the Bank fails to act quickly enough and continues to ignore indicators, we could see rates drop to below five per cent in 2008, as the committee will have to overcompensate to avoid an economic downturn.”
Calls for immediate action have grown louder from industry in recent days, as firms grapple with the fall-out from this summer’s credit crunch and the blow to confidence caused by the run on Northern Rock.
The TUC said: “The signs last week were that economic growth, already predicted to fall in 2008, will decline even further than previously expected. In our view, this is the greater threat and a cut is needed to boost economic growth.”
Tesco, the country’s biggest retailer, also called on the Bank to cut rates, dismissing fears about food price inflation as “hype”.
The senior economist at the Royal Institution of Chartered Surveyors, David Stubbs, said: “These figures provide yet more evidence of a slowdown in the housing market. Higher interest rates coupled with tighter lending criteria are denying many first-time buyers access to today’s constrained property market.
“Confidence among home buyers remains shaky since the Northern Rock affair, as today’s consumer confidence figures emphasise.
“We believe that there is good reason for the Bank of England to deliver a precautionary interest rate cut to guard against the risk of a sharper than expected downturn in the economy and the housing market.” The latest fall pushed the average cost of a home further below the £200,000 barrier to £194,895.
Consumer confidence saw a record drop in November, alongside a sharp drop in activity in the services sector.The Nationwide said its main consumer confidence index dropped by 12 points to 86 in November.
The fall was the biggest recorded in a single month since the index was first launched in May 2004, and the slide put the index back to levels last seen in February this year.
Nationwide blamed continued uncertainty about the credit crunch, higher food prices and petrol breaking through the £1-a-litre barrier.
But despite signs that the housing slowdown is well under way, worries about inflationary pressures may persuade the monetary committee to keep interest rates on hold.