THE number of chartered surveyors reporting house price falls in Wales has reached levels last seen during the early 1990s house price crash, figures show today.
According to new figures, 71% said prices had fallen during December, while just 1% said prices had risen.
The alarming sign led to demands for a cut in interest rates to avoid a yet more damaging slump.
House prices dropped in all regions of Wales during the month, according to figures from the Royal Institution of Chartered Surveyors.
Andrew Davies, of Morgan and Davies estate agents in Lampeter, said the statistics showed “a very disappointing last quarter result which we hope will improve in the new year.
“We do need a further interest rate reduction to convince the market that we are not heading for a major correction in valuations.”
However, borrowers who waited until after the recent interest rate cuts before securing a fixed rate mortgage are still worse off as the average cost of a mortgage continues to rise, further research shows today.
The average interest rate charged on a fixed rate mortgage across the whole market was 7.30% in early December before the Bank of England reduced interest rates by 0.25% to 5.5%.
But since the cut, the average fixed rate has increased to 7.31%, leaving the majority of people taking out a fixed rate loan forced to pay more, according to moneysupermarket.com
Meanwhile, market analysts claim today that mortgage lenders would continue to rely on wholesale funding and securitisation to raise money despite the recent credit crunch, and despite such funding models being questioned after the collapse of Northern Rock.
Fixed-rate mortgages, unlike standard variable rates and tracker deals, are not based on the Bank of England base rate but on swap rates.
It would still be expected, however, that fixed-rate deals would come down to reflect a fall in the official cost of borrowing but this has not been the case, though there are some good deals around for borrowers with very good credit histories.
Louise Cuming, head of mortgages at moneysupermarket.com, said, “Our data shows, on average, unless you are a low-risk borrower, a new fixed-rate mortgage will cost you more.
“I shudder to think what would have happened to the average fixed-rate mortgage if the Bank of England hadn’t cut rates.
“Many homeowners who waited until after the interest rate cut to get a fixed-rate deal will be worse off, much to their annoyance.”
But there is better news for people thinking of taking out a loan, with evidence that the rates charged on these are beginning to fall after rising during most of 2007.
Financial information group Moneyfacts.co.uk said that during the first half of January five lenders, including Barclays, Alliance & Leicester and Britannia Building Society, had reduced their loan rates by up to 3%.
Esther James, personal finance analyst at the group, said, “For most of 2007 we reported rising loan rates, with the demise of sub 6% personal loans and the market finally settling at the end of the year with the best deals around 6.5% to 7%. But as 2008 starts, there is good news for borrowers as rates begin to fall.
“It’s the season of debt consolidation, so perhaps these lenders are looking to maximise their opportunities within this limited window.
“The drop could be a seasonal fluctuation or a limited marketing drive rather than the start of a more widespread trend, but only time will tell.”
There is also evidence today that retired homeowners increasingly sought to cash in on rising house prices to supplement their income during 2007 with figures showing that demand for equity release continued to grow.
Around £1.4bn was released during the year, 24% more than in 2006, according to independent adviser Key Retirement Solutions.
