The credit crunch, which started in the USA, is affecting many things around the world, most notably for us in the UK is the effect it is having on our property market. In fact, the number of mortgage approvals did not recover as many had hoped they would after falling drastically in October and November 2007. Lenders are also becoming more discerning and withdrawing many of their products until the international money markets regain their confidence and start to lend more freely again.

Mortgage equity withdrawals have also suffered because of the credit crunch. This is because housing prices in the UK are falling and falling fast. Lending institutions are, therefore, becoming wary of lending money to homeowners whose homes are currently depreciating in value. For lenders it does not make financial sense and so homeowners looking for a mortgage equity withdrawal are often out of luck.

Forecast for 2008

The UK property market forecast for 2008 appears pretty bleak because buyers are unwilling to pay over the odds when prices are falling and are therefore biding their time until house prices have stabilized. The number of completed sales is anticipated to continue falling throughout the year simply because of this uncertainty and financial institutions tightening up on their lending criteria. As the demand falls so will house prices; with sellers becoming ever more desperate to attract offers.

Their main options are to either wait it out in the hope that prices will start to rise again or to lower their asking prices in order to sell for whatever possible. Those individuals who are not in a position to wait for 6-12 months for the market to improve would benefit most from a Quick House Sale where they can sell their home quickly and easily, usually 3-5 weeks. Although selling properties for cash inevitably means it is sold at below market value, it would at least provide the cash they need and the house is off their hands in no time.

House buyers, particularly first-time buyers,will benefit from these low property prices the most - that is if there are any house buyers who can actually get approved for a mortgage. Any property investor with cash available could well make some great deals on house purchases. However, since the market is tempestuous investors who have not fully researched the area in which they are purchasing should proceed conservatively to see where the market is heading.

Having seen massive rises in property prices over recent years because of the general lack of confidence that pensions will deliver the return on investment required for a comfortable retirement, the rapid contraction in funds available for mortgages just might make prices settle at more realistic levels. The volatility in the UK property market could create some major economic problems in sectors not directly associated with property simply through lack of confidence and a general contraction in the money markets. House prices could correct themselves sharply in the near future but only if lenders are willing to provide the funds at reasonable rates. For now everyone will have to take a wait and see approach but for the moment things do not look good.

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