First things first, we should all remain confident about the housing market. The outlook for both the short and long-term property market is positive and underpinned by strong fundamentals: low interest rates, high levels of employment and a low proportion of new borrowers’ earnings taken up by mortgage payments ‘ this figure currently stands at just 15%. Combined, these factors will continue to provide a solid foundation for housing demand over the coming year.
In the most recent HBOS Economic Forecast (December 2002), house price inflation was forecast to slow gradually from 26% in 2002 to 9% in 2003.
The difficulties that increasing numbers of first-time buyers are facing in getting a foot on the housing ladder will curb demand causing house price growth to slow. As a result, we expect a gradual slowdown in house price inflation, rather than anything more dramatic.
It will also provide comfort to know the UK banking sector is regarded as one of the strongest and best managed in the world. For example, credit rating agencies rank many of the UK’s lenders highly. Not only that but the Financial Services Authority’s (FSA) recently gifted ‘super-regulator’ status and far reaching powers ensure the strength and liquidity of the UK financial services sector is constantly monitored.
The FSA works closely with lenders to regularly ‘stress-test’ how their mortgage books would withstand any economic downturn ‘ so there should not be any unnecessary cause for concern.