He has tried to reassure them that a crash of the scale seen in the early 1990s is very unlikely, but they have seen so many newspaper headlines and television reports heralding a crash that he suspects his comments are falling on deaf ears.
Is there any real evidence that a crash is on the horizon?
Ian Giles is director of marketing at Kensington
What constitutes a property crash is unclear, but if we use the early 1990s as a yardstick, what is clear is that today’s economic fundamentals are very different to the ones seen then.
Today’s circumstances will probably lead to a dip in prices, often on a localised level, rather than anything more significant.
The crash in the early 1990s had two triggers – interest rates doubling from 7.50 per cent to 15 per cent, and spiralling unemployment.
Today the Bank of England Base Rate is in a downward cycle and data from the Office of National Statistics reveals that the number unemployed people dropped in Q4 2007 by 0.1 per cent to 5.3 per cent.
Then there’s the factor that determines price in any market – supply and demand. We’re in a situation where demand for property outstrips supply.
Given these fundamentals, it is highly unlikely we will see a property price crash, but we are likely to see a levelling off in prices that represents a return to realistic growth.
Alex Murray is group director of mortgages at Thinc Group
There is no real evidence that the market will crash, let alone crash on the scale seen in early 1990s. We only have to look at the situation in the early 90s compared to the current situation.
Of course, the market is slowing due to the recent credit issues and Brian needs to make sure his clients understand this. He can do this by using supporting material and research.
Thinc has supported its advisers in this area by providing informational updates on the market, including payment shock, the credit crunch and, of course, the Northern Rock situation. Only if he evidences a balanced argument will his comments have impact.
The national press stories are, as always, based on speculation, usually representing very little fact and I believe Brian’s clients will see this when the subject is approached in a balanced way.
Mortgage advice is not just about selling a mortgage but also reassuring and advising clients during market or personal financial difficulties.
Peter Charles is chief economist at Mortgage Express
Newspaper headline writers focus on selling newspapers, not on providing objective financial advice.
Objectively, between June 1989 and Feb 1993, UK house prices suffered a steady fall, with values some 15 per cent lower by the end of this period. It is generally agreed that these falls were primarily due to high interest rates and sharp rises in unemployment.
Property prices are currently under pressure because of a shortage of liquidity in credit markets, which is reducing effective demand.
This is partially offset by a reduction in the number of homes coming onto the market, but at present the supply of properties exceeds demand. This position is not expected to persist.
The Bank of England indicated in its Inflation Report last month that there will be further Base Rate cuts before the end of the year. This will help to support both the economy and the housing market.
