The Halifax House Price Index has been in place since 1983, reporting on the status of the housing market as reflected in the average amount paid by buyers for a residence. The latest report indicates that 2012 will not be much different than 2011, varying up or down by only 2%. It should be noted, however, that the Index is based on data from Halifax customers only, and though Halifax is the largest mortgage provider in the UK, the report is somewhat limited in scope.
Be that as it may, the current reported average cost of a home in the UK is £160,063, which is down about 1.3% from the same time last year. Martin Ellis, housing economist for Halifax, said that the stability of housing costs will depend partially on the how the rest of the Eurozone is doing, but there are several other factors involved.
Even though the Bank of England is likely to keep the base rate of interest at 0.5% through 2012, banks are still nervous about lending in the face of an economic slump that many forecasters expect will only get worse, so mortgage loans are not easy to obtain. In fact lending criteria is about to get even more stringent in the next few months; lenders say they’re concerned about loans already out there that borrowers can’t repay.
Anyone who does manage to qualify for a new loan has the advantage of record low rates; only about a quarter (26%) of disposable earnings would be needed to make the monthly mortgage payment, well below the average ratio over the past 25 years. However, with the iffy job market and a large majority of homeowners finding that reducing their debt level rather than taking on more of it is a top priority, caution seems to be the byword on both sides of the lending situation.