Housing market slams on the brakes

Average property values rose by just 1.85% over last year, down from a rise of 7.44% in 2006, according to figures from Moneyextra.com.

The average property value searched on Moneyextra.com’s mortgage comparison tool in December 2007 was £227,529, which was up a statistically insignificant £45 on the month and compares with an average value of £223,310 in December 2006.

At the same time, the amount that borrowers were looking to take on in a mortgage has actually fallen to an average of £137,764 in December 2007, down £965 on 12 months ago. Despite a tough market for first time buyers in 2007, it was this sector which showed the strongest gain in average property values, rising 4.31% to £190,040 in December 2007.

The average loan actually completed by borrowers through mortgage brokerage AWD Moneyextra fell to £142,427.60 in December, its lowest level since June and significantly below the average loan value completed for the year as a whole of £154,187.25.

Robin Amlôt, Senior Editor of Moneyextra.com, said, “It’s now clear that the housing market has slammed on the brakes, the most optimistic outlook for house prices for 2008 would appear to be that they’ll stand still but values are falling now and are likely to continue to do so – it’s just a question of how far and how fast they’ll fall.”

“This isn’t necessarily bad news in the long term – the bubble had to burst at some point and provided borrowers can maintain their mortgage payments, which should get easier to do with interest rates expected to fall further this year, the dangers of negative equity should be avoided.”