A warning from Bank of England governor Mervyn King last month suggesting house prices might fall has slashed consumer confidence in the housing market, says Nationwide Building Society.
Latest research by Nationwide – conducted both before and after King commented on the current market boom – reveals a drop in the number of people who believe their homes will have increased in value by the end of the year compared with the period before he issued his warning.
More people also think the value of their homes will fall, since King made his statement, Nationwide says.
Research suggests 52% of homeowners now expect their homes to be worth more by the end of the year, whereas 66% believed their homes would increase in value before King’s speech.
Twice as many people also believe their houses will lose value by the end of the year compared with before he commented on future house prices. That said, there are still only 10% who believe prices will drop.
King made his comments in a speech to the CBI in Glasgow on 14 June. This was only four days after the BoE decided to raise interest rates for the second month in a row, indicating Nationwide's findings may have been more affected by the hike than by King's forecast.
Stuart Bernau, Nationwide’s executive director, says: "Although more people are pessimistic about the future value of their homes, over half still expect them to be worth more by the end of the year.
"The short term economy continues to look robust with the jobs market remaining strong and interest rates continuing to be at historically low levels despite recent rises in the base rate.
"People feel more cautious about the state of the economy in six months time however, and this may lead to them revising future purchasing decisions," he adds.IFAonline
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