Remember the UK housing bubble?
“This is the start of a significant deterioration in risk assets, and while we may hit a new high in the S&P in the next few weeks it will be materially lower in the coming months.” - By Ian Campbell, Reuters
Summary below by Anthony O'Brien
Just months ago a new house price bubble was seen by many as the great danger for the UK.
A chorus built for rate rises and special intervention in the mortgage market. Now the alarm calls are fading.
The talk of danger was spurred by fast annual house price rises – especially in London, where the annual increase in prices was 20.7 percent in the third quarter, based on data from mortgage lender Halifax. The national picture was less frothy, with an annual gain of 9.6 percent.
However pricey houses have been made just about affordable by low interest rates. Mortgage payments accounted for just 29.5 percent of average household income in the third quarter against a long-term average of 35.8 percent. But this mix of dear housing and cheap loans suggests vulnerability. A rise in interest rates might cause another fall in house prices.
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Frequently Asked Questions about this Article…
The main concern was the potential for a new housing price bubble, particularly in London, where house prices saw a significant annual increase.
House prices in London increased by 20.7 percent annually in the third quarter, according to data from mortgage lender Halifax.
Nationally, house prices in the UK saw an annual gain of 9.6 percent.
UK houses are considered affordable due to low interest rates, which have kept mortgage payments at 29.5 percent of average household income, below the long-term average of 35.8 percent.
A rise in interest rates could potentially cause a fall in UK house prices, as it would increase mortgage payments and reduce affordability.
Currently, mortgage payments account for 29.5 percent of average household income, which is lower than the long-term average of 35.8 percent.
The rapid increase in house prices led to calls for rate rises and special interventions in the mortgage market to prevent a housing bubble.
The alarm calls about a UK housing bubble are fading, as the initial concerns have not materialized into immediate threats.
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