House Prices to Fall Another 17% - Fitch

UK house prices have almost 20% to fall further, reported Fitch – a leading British rating agency in its latest statement. Fitch experts are determined that house prices in Great Britain will fall by 30% from their level in 2007; as they have already dropped by 13%, leaving an average house priced at £162,000, Fitch predicted that house prices will decline by another 17%. In its report, Fitch highlighted the rising rate of unemployment and scarce mortgage availability, which are expected to stay the same till 2011 and to negatively influence house prices. According to Fitch’s head of UK residential mortgage-backed securities, Mr. Alastair Bigley, fundamentals of the British economy are not yet sustainable for a strong recovery of the housing market. Fitch’s report also suggests that the decline in house prices to come will bring the house price-to-income ratio to a normal level. At the moment, this ratio is well above the long-term average; Mr. Brian Coulton, Fitch’ s head of global economics, is determined, however, that a 30% decrease in house prices will be quite enough for the ratio to reach the normal level. Experts at Fitch Ratings believe that the current signs of increased loan availability are a false dawn. As the rate of unemployment in the UK is expected to rise, borrowers will default of their payments more often, which will result in an increased level of arrears and repossessions. Banks, thus, will tighten the lending criteria once again. All in all, Fitch Ratings does not expect the UK economy, including the housing sector, to start the recovery earlier than in 2010. The forecasts for the future of the UK economy are very different. For instance, HIS Global Insight’s economist, Mr. Howard Archer, agrees with Fitch by saying that relapses of house prices are very possible in the near future. Meanwhile, mortgage brokers of John Charcol, believe that there are clear indications of the fact that house prices will keep rising in the next months.