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Stuart Law comments on Nationwide House Price Figures

29th August 2008 | back to article listings BACK    print this article PRINT

The Nationwide house price figures released yesterday, claiming the average price of a home in Britain has fallen by 10.5% since August last year, highlights how strongly the mortgage-related indices are diverging from 'whole of the market' data.

Before the credit crunch, the Nationwide and Halifax data reflected house price growth in a very similar way to the other indices, but their rate of decline is much steeper than the whole of market land registry based indices such as CLG and the FT index. The latter is showing growth of 0.3% in the last year.

Halifax and Nationwide indices are based purely on their own mortgage approvals and not the market as a whole. The divergence has been caused in part by mortgage lenders charging relatively high mortgage rates versus the Bank of England base rate and failing to pass savings on to customers as base rates have fallen. In addition, mortgage arrangement fees are significantly higher. This has resulted in purchasers haggling down property prices by a few per cent to compensate for their increased borrowing costs.

We are now seeing the creation of two markets: those heavily reliant on mortgages and those able to rely on substantial deposits or cash.

Stuart Law, Chief Executive of Assetz, comments:

“Data from Halifax and Nationwide is becoming less and less representative of the housing market as a whole, reflecting only the part of the market that is mortgage related and only the lower end of the market.  The FTHPI (Financial Times House Price Index) based upon the whole-of-market Land Registry data currently shows house price growth of 0.3% for the last year whilst the Halifax and Nationwide figures show 8.8 and 10.5% drops respectively.

"With the average house price of a Halifax or Nationwide customer being below that of the national average (by around 25%) it is reasonable to deduce that the client is less well off, and therefore their loan to value is also higher than the national average. It is these customers who are being penalised with higher rates and higher fees, as a result of the lenders charging a premium for perceived risk.

"It is clearly the bottom end of the market that is under the most pressure due to the current mortgage lender terms, with the top end showing greater resilience. There are certainly lower prices in many sectors of the market, but the Land Registry currently shows that the average house price change is very different to the negative picture painted by the relatively small lender surveys. We would suggest they are no longer used as representative of the market as a whole until the market returns to normal."

 

This is a press release by Assetz also available at http://press.assetz.co.uk/articles/4419.html. Alternatively, please see our full press release archive.

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