Another Credit Crunch Property Market?
Published / Last Updated on 22/01/2022
We have been reading and watching various mortgage and property market commentators and it is clear that many bank and financiers are concerned that the UK mortgage market is overheating in the same way it did in 2008 ahead of the ‘credit crunch’ crisis where property prices then tumbled by around 15%.
Given recent property price increases, lenders are becoming ever more 'lose' (or 'innovative' if you prefer a positive word) in finding ways to justify lending people more money. This is a recipe for disaster until wage inflation catches up. This has been quoted as potentially 2008 all over again but others are saying no, this is not the case.
Our comment
The reality is that after any property boom there is always a slowdown and eventually price falls. We expect slowdown, but not a stop, in 2022. Growth will still be there but our pockets will be squeezed this year with inflation hitting our pockets on day to day living costs. In addition, frozen personal allowances and the new 2.5% Social Care levy for all will also hit our spending power.
We suggest it is unlikely there will be a banking collapse but there will be a slow down in property price increases and then as wages catch up, prices will start to push up again. Be careful what you pay for with property though, it could even be leading to a repeat of early 1990s negative equity.