With recent sentiment suggesting house prices will continue to fall quite substantially and conflicting data from major building societies it’s difficult to be certain where house prices will go over the next few years.
I am however fairly sure there will be further decline but the extent of which is in doubt.
When comparing the current housing crash to the past and taking into account affordability levels the extrapolation suggests they could fall by as much as 30% – 50% before they really hit the bottom but mortgage lenders seem to be sticking their necks out with offers that suggest they are at least confident house prices will rise in the not too distant future.
Either that or they are resuming irresponsible risky lending practices and potentially lining up customers for the negative equity shock of their lives.
Nationwide has announced it will be offering 125% loan to value (ltv) mortgages for people wishing to move house.
Several lenders have been offering 100% mortgages to existing customers as a way to allow borrowers with little or no equity the chance to fix their rate instead of remaining on the lenders standard variable rate (SVR) and stave off any rate shock in the short term if interest rates begin to creep up.
Not only that, it also allows the lenders to charge arrangement fees and profit from borrowers who may have otherwise been stuck.
It also increases the statistics related to mortgage approval rates.
Some lenders (Halifax, Lloyds, Coventry), it has been claimed, have been offering deals above 100% ltv to existing customers already in negative equity situations.
But to offer 125% mortgages to customer wishing to move house seems life a huge leap of faith in the future of house prices.
Do Nationwide and other lenders know something we don’t?