IMLA: House prices flat in 2008

Thursday, 8 November 2007 12:00 AM

House prices are likely to rise little faster than inflation during 2008, according to analysis released by the Intermediary Mortgage Lenders Association (IMLA).

The most optimistic of experts -including estate agents Knight Frank and Savills - predict growth of only three per cent in the average UK house price during 2008.

This is little more than expected inflation, making growth negligible in real terms.

In comparison the Council of Mortgage Lenders (CML) expects prices to remain stable, while Capital Economics expects falls of three per cent.

"The fact remains house price inflation will, as always, be uneven across the country, so though we can expect properties in good locations still to increase in value (both actual and real terms) there may be localised falls," said IMLA's executive director Peter Williams.

House repossessions and the number of mortgages falling into arrears are also likely to increase in 2008.

The CML is predicting a 16 per cent increase in the number of mortgages in arrears for more than three months, to 170,000.

Similarly, repossessions are expected to increase 50 per cent to 45,000 in 2008.

"Although most lenders are experiencing a clear increase in arrears and possessions, it is from a very low base," continued Mr Williams.

"Even with these forecast increases, only 1.42 per cent of all loans would be three months or more in arrears, and 0.38 per cent of loans in possession.

"Looking back at 1991 repossessions were running at over 75,000 in the year and almost 0.8 per cent of mortgages. We are a long way from that, even in 2008."

The drop in the number of mortgages being issued in the previous two months, as reported by the Bank of England, is also expected to continue into 2008.

Given these indicators the wider picture is somewhat gloomy according to IMLA.

"The housing and mortgage markets are likely to remain flat in 2008, and some borrowers will be squeezed by payment shock as their mortgages are re-priced based on higher money market and swap rates.

"Without doubt, there are some clouds on the near horizon," concluded Mr Williams.

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