House prices continued to slide in July, with the average home worth around £15,000, less than a year ago, new figures from Halifax show.
The nation’s largest mortgage lender said prices fell 1.7% during July, dragging the annual rate of decline from 6.1% in June to 8.8% today.
This represents the biggest drop since December 1992, and it means that the average house is now worth £177,351 – the same as in June 2006.
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Combination of factors
The latest figures mean that prices have now fallen by more than 1.5% for four consecutive months.
“Pressure on householders' income, together with a very significant reduction in mortgage finance due to the global financial markets crisis, is constraining potential house buyers' ability to enter the market,” explains Halifax economist Suren Thiru. “This is resulting in both lower prices and activity levels.”
But while things look dire at the moment, Thiru is confident that strong underlying market factors, such as low interest rates, a solid labour market and a shortage of new houses, will prevent an outright property crash.
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Good news on the mortgage front
Homebuyers struggling to find a decent mortgage deal will be pleased to learn that mortgage rates appear to finally be coming down again, with the Royal Bank of Scotland, NatWest and Abbey all announcing cuts this week.
NatWest & RBS have reduced “the majority” of their fixed and tracker mortgage rates by up to 0.30%, and will be making the updated offers available to both new customers and existing customers switching deals
Meanwhile, Abbey is cutting rates on some of its two and three-year fixed and tracker deals by up to 0.10%.
The reductions mean that a two-year tracker with a 75% loan to value now starts from 5.89% with a £995 fee. Two and three-year fixed rate products, both with and without free legals and valuation, now start from 6.19% with £995 fee.
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Increase your odds
Despite these few announcements, there’s no getting around the fact that mortgages are still far more expensive than they were a year ago, web sub 5% deals were almost the norm.
If you are desperate to take advantage of the falling house prices, there are a couple of things you can do to boost your chances of getting a competitive mortgage.
The first, and most obvious, one is to scrape together as big a deposit as you possibly can. This is easier said than done but as we mentioned before, mortgage lenders view customers with small deposits as high risk, and will either penalise you with high rates or reject you outright. So scrimp and save everything you can, borrow from the Bank of Mum & Dad, or do whatever you must to piece together a sizeable lump sum.
Another good idea is to visit a mortgage broker. Not only will they help you decipher all the legal and financial jargon, but brokers also have access to deals that aren’t offered to the public direct. Best of all, they're free, so you've got nothing to lose.
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