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House prices continue to fall in August – should I fix a rate?
29 August, 2008

Acccording to the latest figures by the Nationwide the price of a typical house fell by a massive 1.9% in August. This equates to a 10.5% drop year on year, the building society said. The average home is now £19,000 cheaper at £164,654 compared with the same time last year.

The Nationwides cheif economist Fionnuala Earley said “The price of a typical house fell by 1.9% in August, bringing the annual fall into double digits for the first time since the fourth quarter of 1990. The price of a typical house fell by 10.5% over the last twelve months to £164,654. While the pace of monthly falls picked up during the month, the less volatile three month on three month measure, eased very slightly in August to 4.5% from 4.6% in July".

Reports form Estate agents are a little more encouraging and optimistic. The data suggests that there may some interest returning to the market. Agents are reporting an upswing in new buyers enquiries, maybe stimulated by recent falls in prices and the opportunities to negeotaite further price reductions.

However the increase in enquiries has not yet translated into sales which is not encouraging.

The level of borrowing is still clearly much lower year on year with some reports saying that mortgage lending is down by a massive 60% year on year.

Borrowers who are active are tending to go for longer term fixed rate deals instead of trackers even though the rates are slightly higher.

The inflation report for August was more dovish than Mays, even though inflation is at its highest level since 1992 and more than twice the Bank of England target. The Bank of Englands growth and infaltion forecasts have indicated that there may be room for rate cuts in the near future but this is by no means a foregone conclusion.

The market has reacted to this and as a consequence fixed rates have started to come down from their recent peaks. The expectation of a reduction in Bank of England rates may have little effect whilst the overall confidence in market conditions and particularly the housing market is still very low.

So what does this mean to you if you are looking for a Mortgage.
As rates and in particular longer term fixed rates start to come down it is worth while looking at fixing a rate for at least 5 years. As stated earlier you may pay a little more in relation to a tracker rate but my personal view is that fixing a longer term rate gives you peace of mind that you will not have any nasty shocks in the future.

Look at your affordabilty and lock in a good fixed rate, don’t worry about the possibilty of loosing out on a small reduction in rates as you are covering yourself for any possible increases in rates over the medium term.

Nationwide in my mind are one of the best lenders on the market. Their rates have always been and remain to be competative. Their fees are generally alot lower than other lenders and they conduct the process very well. Their lending policy is quite conseravtive and they tend to have lower LTVs than otehr lenders.

They don’t get involved in the sub prime market and like to lend to the better end of the market.

Have a look at their rates, you can apply online and they will give you a Decsision in Principle in a matter of minutes.They will tell you based on your affordability what they are prepared to lend you subject to the valuation of your property. They also offer FREE VALUATION and FREE LEGALS with low administration costs for fixed rates.

Take a look at their offerings here.