Prepare for more house price falls

David Kuo, Head of Personal Finance at Fool.co.uk, says: “The abrupt monthly fall of 2.5% underlines Fool.co.uk’s position that the long overdue correction in house prices could see the value of the average home drop by as much as 20% this year.

“According to Halifax, house prices rose 1.1% based on quarterly year-on-year figures. But the reality is house prices fell 1.3% on a monthly year-on-year basis. Fool.co.uk therefore urges mortgage payers to brace themselves for further falls.

“The value of your home is crucial when applying for your next mortgage deal. It is used to assess the loan-to-value, which is the size of the loan compared to the value of the property.

“The best mortgage deals are restricted to homeowners with small loans compared to the value the property. So, in a falling property market, it is important to reduce the loan quickly by overpaying your mortgage.

“Unfortunately, quoting Halifax’s quarterly year-on-year figures to a lender will not cut much ice if the mortgage market is frozen and you home has actually fallen in value.”