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Firstrung: House prices to fall by 20%

The housing market in the UK could collapse in the next two years and cause a negative equity nightmare for people looking to remortgage, property website Firstrung has suggested.

According to the firm, the raising of rates and tightened loans lending criteria which have come with the credit crunch could see a reduction of house prices of 20 per cent.

Such a fall, however, could prove very useful for first-time buyers who could not otherwise have afforded to buy at current prices.

Paul Holmes, operations director at Firstrung, said: "I think first-time buyers are going to benefit hugely. You have first-time buyers who are flavour of the day from house builders who have over-developed massively and now have no customers and so the only people they can possibly look for are first-time buyers."

He added: "There are real problems here and ultimately house prices can only accelerate because the cheap and readily available credit has gone so there’s only one place for house prices to go and that’s to fall quite dramatically."

The most recent national house price survey, released last week by Nationwide, found an overall 0.6 per cent reduction in property costs for March.

While annual house price inflation was still detected by the study, it was at its lowest level for over a decade.

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