UK House Price on decline: Mortgage falls

The mortgage markets in UK are not willing to take a respite. It has been 5 continuous months of decline in the House prices – they fell for the fifth month in a row during February. However, there were some positive signals that housing demand is beginning to increase due to the lower interest rates.

As per the news, the average price of a house in Wales and England went down by approximately 0.2% during the current month of February to around £175,000, according to property information business - Hometrack.

The yearly inflation rate for house price continued its downward journey to come at just 1.4%, which is its lowest level since April 2006.

But Hometrack said that despite the continued weakness in underlying prices, there were signs that demand was improving, with the number of new buyers registering with estate agents increasing by 7.9% during the month, compared with an 11.5% fall in January.
The group said there was also a slight rise in the number of sales agreed, which contributed to February's price fall being lower than the 0.3% slide seen during each of the previous two months.
The figures come after property website Rightmove reported a 3.2% jump in house prices in England and Wales in the four weeks to February 9, although it said some of the gain was due to market distortions following the final roll-out of the Government's controversial Home Information Packs.
Hence, there has been a modest growth in the registrations of new buyer which is being taken as a proof of increasing and firm demand, but it is backed largely by the recent interest rate cuts across the globe, with London and the South East registering the largest increases in demand.

At the same time, the rise in buyer numbers was met by a similar increase in the number of homes coming on to the market, whereas during the past the growth in demand has outstripped the increase in supply.

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UK Home Repossessions: Highest since 1999

The latest data figures released by the CML or council of Mortgage lenders indicate a disturbing sign in the UK real estate markets. Look at the graph below (source BBC), which indicates the no. of homes repossessed by the mortgage lender or mortgage company because the borrower was unable to repay the loans.



The graph clearly indicates that there has been a consistent rise in the repossessions since 2003 and it is at its highest levels now. Not only that, the current set of mortgage borrowers, a significant number of them are reported to be repaying their mortgages using Credit Cards – which means taking one credit to return a previous one.

The mortgage lenders are directing the issue to higher cost of living, higher amount of bills that people have to pay and high cost of food as well. No wonder why living in a city like London requires a fortune – simple things like moving around in a car in central London forces you to pay heavy congestion charges. The recently released US consumer spending data appears no good either.

Anyways, the data is no way a good indicator of the economy. If this is the state of a so called developed country, how about the so-called emerging economies like India & China?

Banks in India are learnt to throw away loans to anyone and everyone. Then to “recover” the loans, they need to hire “recovery agents”. Things with such data are definitely no good. Emerging economies are still highly dependent on exports to the developed countries.

China for electronics, etc and India for manufacturing & software exports. If the developed economies face such a situation where they find their consumers spending less and less, it is but obvious that the emerging economies will suffer. The picture emerging on the global front is definitely not that of convenience, where one can simply play around with his investments. It may take a long time before this depressing situation gets away with and the economy returns to normalcy.

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