Chancellor advocates confidence in UK property market

The Chancellor of the Exchequer, Alistair Darling, has been explaining why he remains confident in the UK’s housing market.

Speaking yesterday at the Engineering Employers’ Federation dinner in London, Mr Darling put the case that mortgage interest rates, low unemployment and a shortages of homes mean that the UK is less vulnerable to a house price crash than the US.

It is now clear that the UK market has entered a period of slowdown after a decade of property price inflation that tripled the cost of a home.

The average price of a property is now around 4% higher than a year ago but some analysts are predicting a 5% drop in 2008, because of the delayed effect of bank rate rises; tighter lending criteria and higher household expenses.

However, the Chancellor is convinced that there will be no return to the repossession levels of the 1990s, stating: “Market conditions today are very different from those we saw in the early 1990s. Interest rates remain at comparatively low levels - as do mortgage rates. And unemployment is currently at 30-year lows.”

Adding: “What’s more, there are important differences between the housing market in the US and the housing market here. While many US mortgages were sold at hugely discounted rates, leaving people unable to meet repayments when rates increased, lenders in the UK have been more responsible in taking account of an individual’s ability to pay. And demand for housing outstrips supply.”

Mr Darling has indicated that the budget on 12th March will provide encouragement for borrowers to take-up affordable fixed-rate mortgages, explaining: “For many households, particularly those on low incomes, fixing the level of mortgage repayments for several years makes real sense; and it can also contribute to wider macroeconomic stability.”

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