Advice for homeowners from debt agency following bleak forecast from CML

The Council of Mortgage Lenders recently released a report that made for very gloomy reading in terms of the housing and mortgage markets. According to the CML there is bad news in store when it comes to house prices, property sales, and lending levels in the UK.

Last October the CML predicted that over the course of this year property prices in the UK would rise by 1%. However, the CML has now changed this prediction radically, stating that there is more likely to be a drop of 7% in house prices over the course of this year – a prediction similar to that made by a variety of industry officials as well as by the government.

In addition to predicting a 7% drop in house prices for this year, the CML has also predicted that property sales or transactions will drop by around 35% over the course of the year, and lending levels will fall by around 50% as the credit crunch continues to wreak havoc in the money markets and consumers hold off purchasing property due to ongoing house price falls.

Following the predictions from the CML one debt advice agency, debtadvisersdirect.co.uk, has been offering advice to homeowners and those thinking of getting on to the property ladder.

An official from the agency stated: “The CML anticipates a 7% year-on-year drop in house prices by the end of 2008. After a decade of rapid growth, this is clearly an unwelcome shock to homeowners. If they’re thinking of moving, they may feel compelled to accept a low offer if they wish to sell their property before prices drop further. And anyone seeking to consolidate their debts with a secured loan or remortgage may have less equity to draw on. They may wish to wait for conditions to improve before they consolidate their debts – and if they can’t wait, they may well have to consider alternative debt solutions, such as a debt management plan or IVA.”

The agency added: “Naturally, people with high-LTV mortgages are particularly worried about negative equity: when a property’s value is less than the debt owed, the owner can be ‘tied in’ to their property, unable to sell it to clear their mortgage debt. Anyone in that situation should seek debt advice without delay. What’s more, the current lending squeeze means that many potential first-time buyers can’t take advantage of falling prices – so today’s tighter lending criteria are depriving the housing market of the demand that could help bolster those prices.”

Of course, the state of the financial climate at the moment has inevitably had a knock on effect on the economy. Figures from the Office for National Statistics show that in March and April retail sales fell. This is likely to affect consumer confidence, and could also affect employment levels. All of this has fuelled rising concern that the UK could be on the brink of recession.

One official said: “From solicitors and estate agents to removal firms and decorators, a slowdown in the housing market affects a wide range of people, who may find themselves with lower disposable incomes. At the same time, would-be homeowners are spending less as they save up for massive deposits.”

The agency also reiterated the importance of seeking professional advice in the event that the homeowner is unable to keep up with debt and mortgage repayments, stating: “Clearly, any reduction in disposable income indicates a decreased ability to make monthly repayments to debts – so in times of economic stress, it’s particularly important for borrowers to get their finances in order. Given the current lending squeeze, it’s essential that people in financial difficulties talk to a debt adviser who specialises in helping people with adverse credit ratings. Debtadvisersdirect.co.uk doesn’t ‘just’ provide debt advice. We provide a wide range of debt solutions, from debt consolidation loans to debt management plans, IVAs, remortgages and managed bank accounts.”

This view has also been expressed by officials from the Council of Mortgage Lenders, who have stated that homeowners that start to fall behind with their mortgage repayments need to contact their lenders at the earliest opportunity so that a suitable solution can be reached before things get out of hand.

One official from the CML said: “They might consider re-scheduling the loan, and there are possibilities for extending the term of the loan which could reduce payments. All of these will depend on what’s suitable in the individual’s circumstances, the lender and the borrower need to sit down and work out a plan that fits the individual’s circumstances.”