"Slowdown does not mean crash" - IMLA

Friday, 12 October 2007 12:00 AM

A slowdown in the housing market does not necessarily mean their will be a price crash, according to the Intermediary Mortgage Lenders Association (IMLA).

Following yesterdays report by the Royal Institution of Chartered Surveyors (Rics), showing house prices have fallen for the second consecutive month; the IMLA argues there will be no crash.

"It was inevitable the housing market would experience a slowdown in activity and pricing levels following the disruption in the financial markets which led to a temporary reduction in the availability of mortgages, tightening of lending criteria and upward pressure on pricing alongside successive Bank of England interest rate rises," commented Peter Williams, executive director of IMLA.

"With the well-publicised problems at Northern Rock, consumers have been quite understandably adopting a wait-and-see approach, not because they fear the worst but because they are unsure of what the immediate future holds."

However, the organisation - which represents lenders who gain funding through wholesale mortgage markets - suggests the figures are not indicative of a crash.

"This doesn't affect the fundamentals of the market, which remain solid," continued Mr Williams.

"Employment remains high, interest rates remain historically low - despite recent volatility - and the economic backdrop remains positive.

"As far as lenders are concerned, a number have been affected by the tightening of availability of wholesale funding in the money markets and the virtual closure of the securitisation markets on the back of (unfounded) worries there could be contagion over here from the US sub-prime problems.

"However, this was a temporary issue and the markets are now slowly coming back to life."

The IMLA expects the markets to return to equilibrium in the near future.

"There is now a good supply of funds available to the consumer.

"Plenty of lenders have plenty of money to offer to creditworthy customers, and in most cases there's no reason for a shortage of funds to be an impediment to normal home buying or remortgaging activity.

"The housing market is likely to continue to tick over at both lower and slower levels for a number of months, but there is no reason to expect any major falls in property prices," concluded Mr Williams.

Tags:
• uk property news