2012 housing market forecast

The UK housing market has had a tough time over the last few months. House prices have been falling everywhere except London and mortgages have become slightly easier to get hold off, despite the fact that deposits are still difficult to afford for many. 

Many potential homeowners have had to stay within the private rented sector, paying record high rates for rent when it would be cheaper to buy a house in some cases. But that was 2011! Whatís in store for 2012Ö.

House prices

Over the last 12 months house prices have remained fairly stagnant, increasing slightly before falling on a month-month basis. House prices fell by 0.3% generally in 2011, according to figures from the Department for Communities and Local Government.

The North/South divide continued to grow, as prices in the South were significantly higher than those in the North of England. London bucked the UK trend and continues to be the only region where house prices increase month-month.

This trend looks set to continue well into 2012 as the Nationwide Monthly House price Index revealed that property values fell 0.2% in January and prices will take a ësidewaysí step this year.

The 0.2% fall is still 0.6% higher than January 2011ís figures and now the average house price is £162,228.

House prices increased in London once again, this time by 2.8% which means £345,000 is now the average property price in the city. Prices also fell in the North-East of England, by 7.1%.


Banks and lenders have become engaged in a bitter battle to offer lower mortgage rates to get the market flowing again. Following the financial crash of 2008, banks and lenders tightened their grip on mortgages and, as a result (along with other factors), the housing market crashed. This almost caused overall activity to come to a halt. As banks and lenders begin to reduce their mortgage restrictions they are starting to lend more fluidly again.

2012 could be a good year for potential homeowners as a mortgage price war seems to have begun. In a bid to kick-start the UKís housing marking, rates on five year and ten year mortgages have fallen to their lowest level ever.
Chelsea Building Society launched a five-year fixed rate mortgage at just 3.19%, which is the lowest since records began. This means that borrowers need to buy only 30% equity and a fee of £1,495. This record low rate is on a mortgage of up to 70% loan-value (LTV), however, buyers will have to cough up for a 30% deposit. This may be unrealistic for many first time buyers in the current economic climate. 

If you are concerned about being able to make repayments on your mortgage, you could take out mortgage protection insurance. This could provide you with peace of mind and the comfort of knowing that in the event of redundancy, sickness or an accident, repayments on your mortgage can be made for a period of up to 12 months.

On the other hand, this is a great deal for homeowners concerned about increased mortgage payments. Whilst the base rate remains at an historic low of 0.5%, homeowners on a variable rate mortgage have been able to enjoy paying reduced interest rates. However, those on fixed rate mortgages have not.
Banks and lenders are now reducing their fixed rate mortgages.

Norwich & Peterborough Building Society is also offering a ten year fixed rate mortgage at a record low of 3.99%.

ìThe increased competition in this part of the mortgage market could also lead to a further fall in the fees and rates for longer term fixed mortgages,î commented Michael Ossei from uSwitch.

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