Double dip threatens debt

14/06/2010

Double dip threatens debt

House prices across the UK have dropped for the third consecutive month in a row prompting fears amongst some financial experts that the country could be heading for a double dip recession.

The figures from Acadametrics, a house price research consultancy, use actual house prices rather than the asking or estimated prices potentially giving them greater credibility.

The results of the survey suggest that the average house was £220,352 in May, a drop of 0.2 percent from the month before. May also saw a fall in volume with the number of homes sold falling by about 18 percent.

The downward trend in both figures has sounded alarm bells for some analysts who fear that they could herald the start of a so-called double dip, after the brief price rises seen by the housing market in 2009.

The fear of a possible increase in Capital Gains Tax is one of the main things that experts think could be driving prices down as the coalition government considers a large increase in the tax to help balance their books.

Another possible factor is the scrapping of Home Information Packs which has led to an increase in homes being added to the market and a subsequent fall in prices.

Despite the overall average price falls, the Acadametrics survey noted that there was a wide variation between regions with some areas falling much faster than others.

The East Midlands fared the worst with a drop of two percent, while Greater London posted the smallest drops with an average fall of 0.1 percent.

Dr. Peter Williams, the Chairman of Acadametrics, said that despite the figures for the last three months, opinion was divided as to how the trend would develop "The housing market stalled in May, although it remains unclear as to whether this is the start of a sustained decline. The question now is will that decline continue through to the end of the year and beyond?
"There is much to suggest that it will, although in reality there is a spectrum of views from analysts ranging from a price fall of 7% to a 3% rise over the next six months. Clearly, the emergency budget on 22 June will offer some clarity, not least on CGT but also on other tax rises and expenditure cuts."

Any further decline in house prices is likely to be bad news for those people coming to the end of fixed rate mortgages as lenders may be reluctant to renew on the same terms, especially to homeowners that now find themselves in negative equity.

The need to find extra cash to pay the mortgage sometimes leaves families relying on credit cards as the only option to pay day to day bills, a situation that can often spiral quickly out of control.

If you're struggling to meet payments on a credit card, or your debt will make it hard to find a reasonable mortgage deal, then get in touch with ClearStart today and let us help you improve your life by reducing your debt. ADNFCR-3106-ID-19834220-ADNFCR