Following on from our article yesterday about the Bank of England statement on the availability of mortgages, an expert in the mortgage market has advised MPs that he believes the worst of house price reductions in the UK are now over.
Professor David Miles is a Bank of England advisor and the author of a mortgage market report in 2003 and 2004 commission by the Government, and is also the latest member of the Monetary Policy Committee that sets interest rates. This week, we have seen news from the Nationwide that house prices have now risen for three months out of the last four months and Professor Miles added to the hope that the housing market may now be in recovery.
Professor Miles said:
“Expectations are crucial in the housing market and they look a bit better now than a few months ago. My hunch – and I put it no stronger than that – is that we have seen most of the overall aggregate house price falls.
“High loan-to-value mortgage products have dried up – ultimately that is not a disaster; people will wait a bit longer to buy and rent a bit longer. The flow of first-time buyers will be reduced as they accumulate higher deposits.”
However, the Miles Review stated that the mortgage market is currently not focusing sufficiently on the long term and that borrowers remain focused on the short term deals available. As a result, this leaves borrowers exposed to problems when interest rate payments rise.
In an understated ‘I told you so’ Miles also reiterated that back in 2005 and 2006 he had said that house prices were overrated by a figure of about 20 – 25 per cent.