As I look forward to 2010, I think it is worthwhile looking back at 2009 to hopefully give us some clues to what lies ahead for us this year. We started the year with the banks struggling to survive and the knock on effects of this impacting on the wider economy, as we were all credit crunched. However, as we moved into the second half of the year, markets appear to have stabilised a little. The stock market has staged a revival and a fragile recovery is taking place in the housing market. Unfortunately, to achieve stabilisation, the taxpayer has had to pump massive amounts of cash into the economy and most of it has been borrowed money. Due to the parlous state of most of the major lenders, mortgages have remained difficult to obtain during 2009. It could be argued that housing prices have actually increased in some areas due to a lack of supply that has been caused by people sitting tight and not moving due to their inability to obtain the mortgage they need.
As we move into 2010, the supply of credit remains very restricted although, I would expect it to ease a little this year as householders will possibly continue to pay down debt at record levels. Also, endowment plans are now beginning to mature in big numbers this year and these policies will help people to reduce their mortgages even more, thus in theory giving the banks more to lend. To add to this, I would expect credit conditions easing further later in the year, as I predict new lenders will be entering the market, as they take advantage of the very high margins that the banks are operating on at the moment. Coupled with the fact that house prices have stopped falling, I believe this will encourage lenders to be more competitive with the higher loan than value loans, and margins may be trimmed slightly by traditional lenders to combat the new lenders.
I believe we will officially emerge from recession soon but until a new government is elected I see very little happening in terms of interest rate movements or significant house price rises. Even then, I believe it will take a while before the changes they wish to make will impact on the market. So 2011 could be a key year with regard to the long term future of the housing market, as I wonder what new areas the new government will seek to tax as they attempt to start to pay back our mountain of debt. Sadly, I think it is possible that taxation could fall more heavily on the previously comparatively lightly taxed housing market. It may be unpopular, but they will argue desperate times demand desperate measures.
If you wish to review your mortgage needs, Kieron Bassett Financial Services have two Independent Financial Advisors. Contact us on (01524) 832057, via e-mail, info@kieronbassett.com, or log onto www.kieronbassett.com/cms.
Kieron Bassett CertPFS