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Lending and low rates key to 2011 housing market

Any recovery, he warned, will be strongly dependent on the major lenders making mortgage finance more available. Bank of England decisions on interest rates will also have a major effect on the market. The monthly wait for the MPC’s decision on interest rates will be a nervous time for both existing and potential borrowers.

However Mr Bolton King said that, while the housing market faces a tough year, he was confident that no widespread drop in house prices would occur.

He said: “The housing market remains in a state of fragile recovery as the year ends. Frankly, however, this recovery is threatened by the stubborn refusal of major lenders to loosen their self-serving restrictions on mortgage lending.

“A historically low rate of interest has benefited those people who already have a mortgage, but it is likely that over the next 12 months it will rise. That will place more pressure on existing borrowers but also remove mortgages from the reach of even those house buyers with large deposits.

“The danger is that a backlog of pent-up demand for property emerges. That means the market will suffer from lack of demand in the short term and potentially be distorted by a rush of demand when these people can finally get onto the ladder.”

He added: “We do not believe that there will a widespread fall in house prices over the next 12 months. There will be ups and downs, but I’m confident that we won’t see a plunge.

“What we will see is the emergence of ‘postcode power’ – as demand for property in some areas fuels a healthy market while other, less desirable areas, are in danger of being left behind.”

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0 thoughts on “Lending and low rates key to 2011 housing market

  1. Sam Collett says:

    I agree very much with the rise of “postcode power” in recessionary times we see a flight to safety and that is found in quality housing areas.

  2. I think if interest rates rise to the level that was normal 3 years ago the property market will crash. The banks arn’t lending with the base rate being at 0.50% let alone if they rise to 5+%. We all lived a fake boom borrowed and set our lifestyles during the boom. Now the money has been taken away so what happens next. If property prices crash allot of homes will be in negative equity. At the moment backs have the control they been given the chance to raise there rates above the base rate.