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House price stability forecast for 2012

House price stability forecast for 2012

Category: Mortgages

Updated: 12/12/2011
First Published: 12/12/2011

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

House prices are set to remain relatively unchanged throughout the course of 2012, according to the latest market predictions by Halifax.

The bank suggests the steady market conditions which have seen house prices and house sales stabilise in 2011 are likely to continue into next year.

However, it seems much is set to depend on how the UK economy performs during the next 12 months, which in turn will depend on how events unfold in the Eurozone.

Despite the uncertainty created by events in Europe, the bank says the low Bank of England base rate and favourable affordability conditions are set to support the housing market.

Indeed, mainly as a consequence of low interest rates, typical mortgage payments for new borrowers have fallen from a peak of 48% of average disposable earnings in mid 2007 to 26% in autumn this year.

This is significantly below the average of 37% over the past 25 years and is at its lowest since 1997.

Martin Ellis, housing economist at Halifax, said that as long as rates stay low, the odds will continue to be stacked favourably for those who already have a mortgage and those who are able to raise the required deposit.

"The favourable affordability position should also help to keep down the numbers of homeowners forced to sell their properties because they cannot keep up with their mortgage payments," he added.

"A significant rise in the number of forced sellers is often a factor associated with sharp house price falls."

Although house prices have been forecast to end 2012 close to where they started it, regional variations are expected across the country.

London and the South East seem set to enjoy the strongest prices thanks to their tendency to perform better economically, while anywhere outside of southern England is expected to struggle by comparison.

"Weak economic growth and the prospect of continuing high, and probably rising, levels of unemployment led by large scale public sector job losses, will constrain housing demand," added Martin Ellis.

"Continuing significant pressures on householders' finances will also limit many people's ability, and willingness, to buy a home.

"These pressures will come from a combination of subdued earnings growth, high (but falling) inflation, the substantial fiscal tightening that is taking place and an ongoing rebalancing of household sector finances with many families seeking to reduce their debts."

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