House repossessions are up 30% for the first half of this year compared to the same time last year. (The BBC has this).
This is still low compared to 1991, however it is still the highest since 2001.
Insolvencies are down 8% on the first quarter however they are still very high, even by the standards of 1991. (See my previous article here).
The big question is, will there be a house price crash?
The short answer is probably not because there is quite some pent up demand, due to a lot of first time buyers trying to get into the market and the pressure immigration is putting on the market combined with the relatively small number of houses built.
However there are some dark clouds on the horizon. Between now and Christmas there will be 300,000 mortgages where the fixed rate ends. In some cases repayments may jump by as much as 50%. Those buyers that either overextended themselves to buy, have since run up credit card debts
or have just got used to that level of disposable income there is going to be a lot of belt tightening. In short it is going to hurt.
The economy is in a difficult position. Disaster is not definite, but the economy needs to be handled with some care. One wrong turn to lead to an awful lot of pain.
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Hi Benedict - hopefully there won't be a crash. Bank Rate has been raised by the same extent it was between mid-2003 and mid-2004; after that tightening phase, house price inflation dipped (briefly) to zero before rising again.
Should the Bank raise rates further, of course, then such a benign scenario might prove optimistic ...
Elliot, yes hopefully there won't be a crash, hough a bit of a readjustment is long overdue.
There are some issues in the market, not the least of which is that there are some people who will be coming of fixed rates that will get a bot of a shock, as well as others who have invested in buy to let in the wrong sort of property in the wrong place.
The problem is that we are in a wide river, but within that we are in a narrow channel and we don't quite know where the channel is.
I'm afraid the house price crash roots are already there. The crash will not come from these higher interest rates with 2 year fixes resetting. The crash will not come from a lack of demand - there is a real demand for properties. The crash will come from the fuel of house price inflation being removed - easy credit.
The ar$e has fallen out of the debt market over the last few months. Lenders here have been reckless in their lending with an average of 4.25 times joint income - that used to be 2.5 joint income 5/6 years ago. The lenders will have to reassess their lending criteria and start lending like they used to. No more interest only with no repayment vehicle, no more not checking incomes and no more high lending %
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