They warned it could happen. It has. The credit crunch is here. The British Bankers Association said today that the flow of cash going into the housing market has halved, compared with last year. The implications for house prices - and for your personal prosperity, very likely - are starkly clear.
That said, provided you keep your job in this little slump-ette and you don't have to sell your home because of family breakdown, then any losses will be purely "paper", and the sort of thing you ought to be able to ride out. If you don't own your own home it means that there will soon be some excellent bargains to be had out there in the coming buyers' market - if you can get a mortgage.
The Bank of England's Special Liquidity Scheme will help the banks lend to housebuyers, but not be as much as maybe some thing. We won't see the return of the 100 per cent mortgage anytime soon, and nor should we. Even with the excesses we've seen, the British mortgage market was more tightly regulated than the US, and one reason we might not have as bad a housing slump as they did.
The wisest thing, all round, is to save up for a big deposit and buy somewhere you like (and forget about "investment" criteria). Then sit back for about 15 years and wait for the next property bubble...
The best thing you can do is not to over-mortgage yourself. We're all too greedy when it comes to property. Much better to have a nice small place which is manageable than be forced to work forever under the stress of having to work or lose the house. Better still, sell up and rent. Or build your own.
Posted by: carin | Wednesday, 23 April 2008 at 07:17 PM
If it means a halt to the sort of people who make and distribute the 'house-porn' programmes on daytime TV (I'm retired,that's how I know about 'em)and that I won't have to watch clumsy/supersized/dull/overpaid/egotistic/vulgarians (perm any three from six) saying 'wow' or 'I can just see me with a glas of red on this terrace' when they see an overdecorated barn of a place with a nasty patio or pool (in the UK?come ON) then Hoorah for the slumpette. A house or whatever is somewhere to live. Some people would kill for a home. But they hold back. Now it's our turn.
Posted by: Jack Hughes | Thursday, 24 April 2008 at 08:12 AM
Yes, the banks inflated the housing market by promiscuous lending and excessive loan-to-value ratios. So everyone thought they were rich and went on a spending binge. Hence balance of payments deficit and credit crunch. Time to pay the piper?
Posted by: Mark_IV | Thursday, 24 April 2008 at 01:59 PM