DANGERS OF A “FROTHY" HOUSING MARKET (Sept 2006)

News Release

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Email: fwalker@hurlstons.com
keithtondeur@creditaction.org.uk
www.creditaction.org.uk

DANGERS OF A “FROTHY” HOUSING MARKET

Credit Action, the money education charity, warns that in their eagerness to buy properties, consumers are being tempted into taking out mortgages which they may not be able to sustain.

According to the charity, conditions in the housing market are starting to mirror those of the early 90s when thousands of people had their homes repossessed. For example: - steeply rising house prices - first time buyers struggling to get a foot on the ladder - a rise in interest only mortgages (as happened with endowment mortgages) - a raft of new product launches including mortgages allowing consumers to borrow five times their salary, “buying with friends” options and ones which can be passed on to the next generation.

“The UK housing market has been frothy for quite a while,” according to Keith Tondeur, Credit Action’s national director, “and while this can be good for the consumer - lots of opportunities for buying and selling, lenders thinking up inventive new ways to lend money, it can also be a sign of over-heating. “Last week the IMF warned that house prices in the UK are too high¹ while we are already seeing rises in the number of house repossessions and mortgage defaulting.² Property looks like a very attractive investment in the UK but not if the investment is more than you can realistically afford.”

¹ IMF twice-yearly report on the world economic outlook Sept 13 2006.

² NOP Survey carried out for CAB September 2006