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Cost of Home Ownership Falls
Written by on 4 September, 2009The latest Credit Action report shows several key financial institutions indicating costs are decreasing in the housing market. The monthly released report summarises key financial and debt data which helps to assess how well UK consumers are coping during the global credit crisis.
According to this report, a total of 56% of the nation’s wealth (£3,923 billion) is currently held in housing stock. However, this figure means that the cumulative value of UK housing has fallen by 9% during the last 12 months.
One of the main reasons for falling house prices is an underlying lack of willingness of the banks to lend money. Bank of England data showed that as many as 20% of all mortgage applications were rejected in July 2009.
However, the good news is that the research has shown that the cost of running the family home has fallen from £8,766 to £7,298 during the last year, representing a much needed fall of £1,468 per household. This fall occurred entirely due to the Bank of England reducing base rates to a low of 0.5%. All other costs associated with home ownership increased.
Whilst falling house prices mean that first-time buyers have less mortgage debt, it has also meant that more people are ‘underwater’ with negative equity. According to Council of Mortgage Lenders (CML) research, as many as 900,000 homeowners have loans secured on their house that are worth more than its value.
Furthermore, these latest statistics speculate that two and a half million families will be unable to move home due to insufficient equity.
Latest statistics produced by Nationwide, the UK’s largest building society, showed that property prices have risen for the fourth consecutive month. These statistics have shown that the annual rate of house price change has increased from -6.2% to -2.7%. Nevertheless, this figure is still 14.4% lower than in October 2007.
However, Right Move said that the asking price for homes fell by £5,102 during the summer. A good indicator of the market’s recovery can be seen by the decline of people selling their homes. The statistics reveal that the number of new sellers has only risen by 82,700. In August 2008, when the market experienced its most severe downturn, there were 106,855 new sellers – this figure represents a fall of 23%.
These figures are confirmed by the Royal Institution of Chartered Surveyors (RICS) who stated that enquiries from buyers have continued to grow strongly, and that this interest is slowly filtering through to sales.
Millions of UK homeowners have taken advantage of falling mortgage rates and are paying-off debt. The annual growth rate of consumer debt fell by 1.4% in the last year. This pattern looks set to continue over the course of 2009. A lot will depend upon how long interest rates stay low for. People with debt problems concerned with difficulties paying their mortgage should seek debt advice.
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