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Rate cut a lifeline for housing market?
Intervention from the Treasury in the form of a bail-out for banks coupled with the half point rate cut from the Bank of England should provide a break on falling house prices.
It looks as if the deal, which would force banks to start lending again, should unblock the mortgage market and that in turn should free up the housing market where transaction volumes have fallen by up to 70% since 2006.
If those people who want to buy are now able to get mortgages, then real demand will return and this should put a floor under values which have fallen by as much as 25% in some places.
Property cardiac massage
I don't expect a return to 2007 values or indeed to those transaction levels in the short term but this plan looks as if it could provide the property market with the cardiac massage that it has been looking for.
Many people are still going to be nervous having had a considerable fright, and we are unlikely to see a marked return before Christmas.
However, provided the banks honour their commitment to get back into the business of lending money, the market should stabilise and then pick up again in 2009 with a return to traditional valuations based upon ability-to-pay.
Problem solved?
The number of mortgage products has fallen from over 12,000 pre Northern Rock to under 3,500 today. This together with the additional deposits now required has been the principle problem for the housing market.
It will be some time before we will see confidence return to the buy-to-let sector since most buyers were investors rather than owner-occupiers but today's anouncment will provide a welcome relief to all involved in the hosuing market although for many it will have come too late.
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