01-10-07, UpMyStreet ©
The financial crisis that sparked thousands of worried Northern Rock savers to queue for hours to withdraw their money could have far-reaching implications for the property market.
With Rightmove reporting a 2.6% fall in asking prices immediately after the crisis, dampened confidence in the market could spell the end of the escalating house prices we've become used to in recent years.
Background to the crisis
A downturn in the global financial market led to Northern Rock requesting an emergency loan from the Bank of England, prompting a plunge in its share prices and customers withdrawing £2 billion.
Many property experts believe that the Northern Rock crisis is symptomatic of a growing lack of confidence in the economy which, coupled with interest rate rises, will lead to a downturn in property price growth.
Mortgage costs rising
As the Northern Rock crisis unfolded, many mortgage lenders reacted by raising the cost of their mortgage products, including Abbey, Alliance and Leicester, Halifax and Nationwide. Andy Hornby of HBOS said: "Increased mortgage costs to consumers will inevitably lead to a slowdown in the mortgage market."
Rightmove: "asking prices down 2.6%"
Rightmove's latest figures showed the lowest number of new sellers on the market since 2004, blamed partly by the introduction of Home Information Packs. The figures also indicated lower than usual buyer demand.
Nationwide: "house prices defied gloomy expectations"
Nationwide's latest figures made more positive reading with an unexpected 0.7% rise in prices. Chief economist Fionnuala Early said "The financial turmoil that began in August extended into September... this has not had an immediate impact on house prices, but the longer-term effect will undoubtedly be to take some of the froth out of the market."
The outlook for buyers
While a slower market could work in the favour of first-time buyers and help them negotiate a lower asking price, there could be far fewer properties coming on the market in the long-term. Keep an eye on recent property sales in your local area and property price trends to ensure you get the right price.
Mortgage costs are also rising, meaning you need to ensure when applying for a mortgage that you can afford higher repayments.
The outlook for sellers
Selling a home depends greatly on the local property market and area. If you're selling a home in an urban area - particularly in London and the South East - where housing supply remains a problem, you should be able to sell at your preferred price. Other local markets may be slower.
With moving costs rising and less competitive mortgage deals on the market, you may be inclined to stay put rather than sell, and find new projects to increase your home's value and space.
Related articles
The longer-term effect will undoubtedly be to take some of the froth out of the market.
Fionnuala Early, chief economist at Nationwide
How the Northern Rock crisis unfolded
- September 13: The BBC announce that Northern Rock have been granted an emergency loan by the Bank of England
- September 14: Northern Rock share prices plunge, and queues form outside branches
- September 15: Queues lengthen outside Northern Rock branches as savers withdraw their money - a total of £2bn
- September 16: The Sunday Telegraph reports on "a very British kind of panic - calm, polite queues - that descended into scrums"
- September 17: The manager of a Northern Rock branch is barricaded in her office by angry customers
- September 17: Chancellor Alistair Darling intervenes by guaranteeing that all savings are safe
- September 19: The Bank of England inject £10bn into the money markets to ease the situation
Useful links
- House prices - view recent sales
- Average property prices - historical trends in Radlett
- Mortgages - find the latest mortgage deals
- Property valuation reports - get the right price for your property
Your comments (22)
nathan from london (Hertsmere), on 15/01/2008 at 18:30
get a fixed rate mortage and make sure its affordable, at least you know where you stand over the next 3 years of the property market.
ian london (Barnet), on 10/01/2008 at 20:48
Rob (Glasgow) wrote:
I am a FTB, been trying to get on the property ladder for 9 years, found the 1bedrm flat I want and can finally comfortably afford it now but have backed out at the last minute for fear of negative equity - friends & family & family have advised to hold off cos perhaps in the coming months I may be able to find a 2bed for the price I'm payn for a 1bed - asking estate agents for advice is a waste of time - they say buy cos the prices have never really fallen in Glasgow, obviously dont want to lose business and are never honest - although prices have already fallen by approx £7,000 in my area - the seller is not even reflecting this decrease in the asking price and won't come down a single penny. Some media reports are very conflicting - opinions seem quite mixed about this whole issue - 1 of my friends is desperate to sell his house to go into renting and then buy a better value home when the prices have fallen cos he suspects a substantial downturn. I am in a dilemma cos I want to buy in a specific block of flats which has great views and big rooms and I've wanted to buy so badly in this address for 9 years- If I dont buy then it will almost certainly sell cos its in a popular address and there is no guarantee that the prices will continue to decline or that I will find a flat in the specific block I want, as most have been converted from 1 to 2bdrms. My fear is if I need a bigger place in the near future I may make a substantial loss - Can sum1 advise pls?
If you like the place and need a place to live, I think you have nothing to lose to buy it. When I bought my house four years ago, everyone told me not to buy, the house price would go down. But I needed a place to live, I would rather pay my mortgage than pay someone else mortgage. We are happily living in this house for 4 years.
Rob (Glasgow) (Glasgow City), on 20/12/2007 at 00:17
I am a FTB, been trying to get on the property ladder for 9 years, found the 1bedrm flat I want and can finally comfortably afford it now but have backed out at the last minute for fear of negative equity - friends & family & family have advised to hold off cos perhaps in the coming months I may be able to find a 2bed for the price I'm payn for a 1bed - asking estate agents for advice is a waste of time - they say buy cos the prices have never really fallen in Glasgow, obviously dont want to lose business and are never honest - although prices have already fallen by approx £7,000 in my area - the seller is not even reflecting this decrease in the asking price and won't come down a single penny. Some media reports are very conflicting - opinions seem quite mixed about this whole issue - 1 of my friends is desperate to sell his house to go into renting and then buy a better value home when the prices have fallen cos he suspects a substantial downturn. I am in a dilemma cos I want to buy in a specific block of flats which has great views and big rooms and I've wanted to buy so badly in this address for 9 years- If I dont buy then it will almost certainly sell cos its in a popular address and there is no guarantee that the prices will continue to decline or that I will find a flat in the specific block I want, as most have been converted from 1 to 2bdrms. My fear is if I need a bigger place in the near future I may make a substantial loss - Can sum1 advise pls?
Shortarms (Newcastle upon Tyne), on 11/11/2007 at 11:24
I suspect the introduction of useless and expensive Home Information Packs has had as much impact on the housing market as the Northern Rock's problems
Nigel (Conwy), on 09/11/2007 at 10:13
"Trust no one-Suspect everyone."
Skip to comments | Add a comment
nigel (Conwy), on 08/11/2007 at 02:29
jobs in this area are mostly part time and minimum wage.rising costs cause debt, in turn repossessions. but where do these people then live!! you got it-they rent. no point moving to a cheaper area, there ain't nun anymore.so rent prices go up because of demand,and the landlords buy more repossessed properties cheap to rent out. but ask yourself this, who are the landlords!! maybe councilors or estate agents or just people in the know!! i wounder. average flat rent here £90+pw. very nice.
Peter - Portincaple (Argyll and Bute), on 27/10/2007 at 10:44
Mike wrote:
It's quite simple really, if you are looking to buy a home to live in and are not speculating to make a quick buck then long term you are making the right decision. Owning property is more than bricks and mortar it is an attitude to life. You only get out what you put in.
Very well said Mike.
There is a huge differrence between a house and a home.
Any house, regardless of it's value can become a home. It is simply down to those who live in it.
Stop using houses as currency and start living in them.
Sven (Milton Keynes), on 25/10/2007 at 18:33
Difficult call. Jesmond is a very popular area, big with students and prices have risen significantly there. When I was looking in Ncl 10 years ago, tyneside flats in Jesmond were going to sealed bids above the asking price. However, I know that recently the price of flats in Ncl has stagnated - someone I know has not seen a rise in value over the last 4 years and stands to loose if they sell now. Make sure you don't pay too much for it.
Petranella James (Newham), on 25/10/2007 at 13:58
This problem of Northern Rock is only a media hype of a constant situation. The actual amount of real money in the world is very limited with each country taking the world liquidity as its own. This is not a new situation. Northern Rock was reckless and got its fingers burnt, but if you work in the money markets you would not panic too much. There will be a correction but it should only be minimal. What needs to happen now is for interest rates to be reduced, not raised so the markets can recover.
swill (Hounslow), on 09/10/2007 at 14:58
In my case a house of asking price £315,000 was only sold for £295,000 and another one @£265,000 sold for 0nly £249,000 (i looked up on upmystreet)when the AGENTS insisted me to only put offers above the asking price as they already have few offers of asking or more. HOW DEVIOUS! I havent bought yet, still looking.......
What are these?
These links appear on every article on UpMyStreet. They enable you to share any article via email or social bookmarking websites (digg, del.icio.us, Facebook).
Clicking the 'email' link will bring up a message window where you can enter someone's email address and send them a link to the article you think they would be interested in.
The 'digg', 'del.icio.us' and 'Facebook' links will add the article link to the specified social bookmarking site. This will save the link for your future reference and will enable you to share it with other people who are likely to be interested in the subjects covered by the article.
These websites require you to register, but registration is quick and free.
Digg registration:
http://digg.com/register/
del.icio.us registration:
https://secure.del.icio.us/register?noredir
Facebook registration:
https://register.facebook.com/r.php