 House prices will go down 7%, says The Council of Mortgage Lenders |
For years we all bought into the dream. Our homes were more than just that - they were investments. Cash cows that would keep on paying us back. We were egged on by TV property programmes. The further up the ladder you go, the more you will get. Each financial stretch would be worth it in the end. But now the credit crunch has arrived and all that seems a bit hollow. House prices are on the slide. Down 2.5% last month. It is the first sustained fall in values for 10 years. The Council of Mortgage Lenders reckons nationally house prices will go down 7% this year but predictions keep being revised. Each day seems to bring more economic bad news with grim implications for the housing market. The International Monetary Fund looked at Britain's housing stock and said it could be over-valued by as much as 30%. 'Time to get real' To take a snapshot of the market right now and see what impact the credit crunch was really having, Panorama commissioned a poll. The results show many of us are still struggling to adapt to the idea that property can go up as well as down.  |  It is almost like we have had a collective loss of memory |
Fifty-nine percent of those we asked thought the credit crunch was making a difference, that it was making people more realistic. Seventy-nine percent thought that was a change, because over the last decade many of us had been unrealistic about what we could afford. All very sensible when talking generally, but get specific and it is a different picture. We asked people whether, despite the fall in house prices and the end of cheap mortgage deals, they would still financially stretch themselves in pursuit of their dream home. Thirty-seven said they would. Professor Steve Wilcox, a housing expert, says it is time we all got real. "It is almost like we have had a collective loss of memory. A lot of people have invested in the market over the last 10 years because of the way they've seen it going up, and sort of assumed it is going to keep on going up like that. Prices go down as well." House repossessions The lessons of pushing yourself too far are getting easier to find. This year it is predicted 45,000 people will have their homes repossessed - a rise of 17%. These are people who pursued the dream too far. The day I went to meet Debbie March, she had just received her latest eviction notice. Three years ago she wanted to get a mortgage to buy her four-bedroom semi near Hinckley. A home for her, her husband and their five children. But the only place she could get a mortgage was from a sub-prime lender with higher interest rates. Now the payments dominate her life. She is struggling to hang on. "You don't get a lot of sleep sometimes," she told me. "It's a real worry. If we don't do something soon it's going to get to the stage where if the prices do crash we won't have enough to sell to pay the mortgage off." So what would she do then? "I give them my keys back." Relying on banks Suman Antcliffe is a debt counsellor with the Citizens Advice Bureau and says there are too many people who only see the property ladder and do not see the price. "I think people are so focused on wanting the dream home that they assume that if the expert is giving them the mortgage, that means they must be able to afford it. And that's the problem, we rely too much on banks and lenders." Ten percent of people we asked admitted they did not read their mortgage documents closely. Fine when things were healthy - not so good now. Stephen Gold is a county court judge. He decides whether people are evicted or not. He says a tighter market means lenders get twitchy. "The real problem is what I call the 'comfort zone'. That's the difference between the market value of the mortgaged property and what it would take to pay off the mortgage. Because as property values decrease that comfort zone shrinks and the more it shrinks the more anxious lenders become." But is it such a bad thing that house prices are falling? Well, our poll showed the nation is a split personality when it comes to property. Fifty-two percent of those we asked said they did want prices to keep coming down. That changes when you talk to homeowners. An overwhelming majority - 81% - want prices to keep rising to keep earning them money. The market is slowing down but it is still a long way short of a crash. But those who lived through the last one have a property experience a whole new generation has never seen. Property is not always a financial asset. It can also be a liability. Panorama: Property - High Anxiety will be on BBC One at 8.30pm on Monday 2 June 2008.
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