This month the Chancellor of the Exchequer, Alastair Darling has said he aims to get the damaged money markets back into shape with the help of financial experts in Washington. He has made announcements that he intends to do everything within his power to put an end to the increasingly critical mortgage situation which is affecting homeowners in Britain.
Financial theorists have said that the slowdown in the British housing market was predicted and inevitable. Darling recently told reporters: “I want to do everything I possibly can to help the mortgage markets because it is not just important for first time buyers, but for the wider economy."
He also said that: "Everybody recognises that the UK housing market is slowing but it's against a background of house prices having risen by 170 per cent, and rising at 10 per cent a year in recent years. You should expect, consistent with what's happening in the UK generally, there to be a slowdown in house prices. It's one of the reasons I want to help restore confidence in the mortgage market and we are also taking broader action to get the markets working."
He was confident though that our mortgage mess and house-price tumble was not a mirror of what is occurring in the US, he said that the UK was different in two ways; in the US there’s an ‘oversupply’ of housing where as in the UK there is too little and here we have tighter regulations governing the mortgage markets.
The mortgage mess means homeowners are choosing to sell their houses because of falling house prices and risk of getting into negative equity. An increasing number of people are also defaulting on mortgage repayments. Resultantly many ex-homeowners and prospective first-time buyers are now choosing to rent instead. The website iammoving.com specialise in helping people issue a change of address and has said that people are choosing to rent because of the predicted drop of UK house prices. The company spokesman said: "At this stage renting is seen as a better option by many than buying a house - which is a big change in attitude from the last ten years."
Most people can see that the market is unstable and are choosing not to buy property in case house prices fall even further. This month it was revealed that one-in-six mortgages are two months in arrears with the Irish subprime lender Start and other UK banks are suffering from similar payment arrears statistics.
Darling is also putting pressure on banks to do more to support their customers. "We will continue to [help banks] but we expect in return for providing support, that banks will look at how they can put money into making mortgage facilities available, particularly for first-time buyers and also pass on to their borrowers the benefits from rate cuts," he said.
Experts believe that the banks consider the funding which the government is proposing to be insufficient and not a long-term solution to the market crisis. Although the Bank of England base rate has been cut since December banks have still had trouble borrowing and that has increased the fees to customers.
Mortgages are getting more expensive and a house is getting cheaper, but even at what seems like the peak of the crisis experts are predicting even higher mortgage rate rises.
