What does the Eurozone crisis mean for UK homeowners?

The Eurozone crisis, along with a recession that has lasted more than three years has unsurprisingly left many of us concerned for our financial futures. Riddled with debt and with significantly less disposable income, Britons remain in the balance wondering what exactly to do next.

What may seem like a forgetful distance away, financial experts are keen to remind us that the outcome of the Eurozone crisis will have major implications on life as we know it in the UK. We are by no means exempt from matters taking place in Europe, and the housing market in particular has taken a considerable blow.

The Eurozone crisis

In 1997 when the Euro was created, borrowing was limited to 0.5% of each government’s annual output. Italy, Germany, France and Spain dismissed the rules, and although Spain won the accolade for ‘Best Behaved Nation’ they had racked up a significant amount of private sector debt. By 2010, Spain’s private debt had increased to 283% – an increase of 96% from 2000, while their government debt remained at around 70%.

Greek elections

Greece entered round two of their elections on 17 June having had difficulty forming a government prior in May 2012. It now falls on New Democracy party leader, Antonis Samaras, to form a coalition government – a task he has just three days to complete. However, finding other parties to join him and support the Austerity package imposed on Greece by the International Monetary Fund won’t be an easy task.

Without it, Greece have been warned that they won’t receive any further funds, leaving them unable to pay their debts. This could signal possible bankruptcy and removal from the Euro.

Reverting back to drachma may not seem like an issue for the UK, but with the Euro already depreciating against the Pound and Dollar, a change of currency will affect travellers, expats living abroad, and those with properties in Greece will see a definite fall in value.

Problems for homeowners?

Falling property value is a trend that experts warn isn’t likely to disappear any time soon. A recent survey from Rightmove indicated that asking prices have reached a record high, but fear sellers are being far too optimistic and advise homeowners to be realistic when judging the current demand for properties.

According to the latest June House Price Index, the prices of new property coming to market is up 1.0% – a third consecutive national high. Since 2011, there has been a 2.4% increase in average house prices and the market has experienced a 1.0% change in the past month.

Currently, the average national house price is £246,235, with figures varying regionally. In the South East, house prices have increased 1.6% since May and now stand at (pound symbol) 318, 717.

This raises obvious concerns amongst homeowners whose properties are currently on the market as people become weary of buying homes. Banks are desperately trying to maintain their profits by increasing mortgage rates and heightening deposits for first-time buyers, making it extremely hard for them to step onto the property ladder. The less first- time buyers there are means there will be more people opting to rent and the price to rent will inevitably rise.

Bob Pannell, chief economist at the Council of Mortgage Lenders (CML) said: “The government has recently announced a number of measures to counter the adverse effects from the Eurozone crisis. It clearly senses an opportunity to bolster home ownership and housing activity, and we look forward to hearing more details about the ‘funding for lending’ initiative which seeks to deliver this.

“Meanwhile, mortgage lending continues to seesaw, albeit against a broadly flat market. Unfortunately, a number of one-off factors, such as the Diamond Jubilee and the Olympics, are set to distort market indicators over the coming months, and it may be the autumn before we can more accurately gauge the state of the market.”

The solution

Jemima Poppy Property Consultants (JPC) are very aware of the difficulties faced by homeowners wanting to sell their home and the reasons for this, which is why we want to help make the process easier.

To get help and FREE advice now, call Jemima Poppy on 07890 527046 anytime. It’s a 24 hour message service. Like us on Facebook and follow our Twitter page.