Money Saving Advice

The recent stock market falls will not necessarily have an impact on the housing market, according to analysts. They still maintain that the UK economy remains strong and unemployment is low.

They did say, however, that the US sub-prime mortgage market will probably have an impact on mortgage rates in the UK, but it might lead to some lower rates, not higher.

Martin Ellis, Halifax chief economist, said: “I don't think the stock market falls will have much of an impact. The economic fundamentals are still very strong, the economy is doing well and unemployment is still very low. If you look back to the stock market crash of 1987, the housing market remained strong and continued to be so into 1988.”

It is interesting to recall that following the stock market fall of 2001, people turned their backs on shares and invested in buy-to-let property instead. A repeat now would give the housing market a boost.

The view is that what is happening in the stock market – however dramatic – is a short-term issue, which would need to pan out for a lot longer to have an adverse effect on the housing market. However, this view does come with a warning that if the downward market does turn into a bear market then there could be wider implications for jobs in the finance sector which might result in an impact on the property market.

The turbulence could lead a rise in some mortgage rates, but a fall in others. Where funding for the mortgage market could get harder for lenders dependent upon the wholesale market, but swap rates, on which loan lenders base their fixed rates, are linked to gilt yields, which have fallen. Some mortgage lenders have already brought their fixed rates down by around 0.25%, and others could follow.